What is going on?

The light at the end of the tunnel - is it an optical illusion? A Train? In my "call around" to a handful of resellers and vendors the tone was surprisingly upbeat. Not euphoric mind you, but positive. The majority went something like this: "We see fourth quarter sales growing slow and steady," said one reseller who has been a consistent over achiever. But, Mr. Reseller added, "Hey let's not kid ourselves into thinking we are at the end of the recession either."

From another reseller:"ROI continues to be the key word. Categories that are getting a lot of attention is storage and security and there is some growth in the growing area of network management."

Interesting to note, the vendors are saying the same thing: "We have to not only follow demand but we have to make sure there is margin in every deal we do."

ROI continues to be the key word with storage and security leading the way with some positive signs with network management. HW and SW will continue to be a struggle but again showing some positive signs. There's a menagerie of other categories, I'm glad to say, that are getting some attention and are forecasted to have a strong fourth quarter: LCD displays, wireless networking, digital cameras/flash memory, notebooks and PDA's.

Maybe this industry is starting to speak in one voice and using the "WE" to refer to "The Industry" as opposed to the "Us" and "Them" attitude that has typified channel and vendor relationships for the past, oh, 15 years - or as far back as I can remember.

The common theme: WE are on a rollercoaster ride from you know where! And its going to take all of US working together to make it a smoother, more enjoyable ride.

Keith Newman is the Editor of ChannelMedia. If you want to arrange a meeting at the upcoming VARVision/SystemBuilder event in SF or have comments, questions and suggestions for ChannelMedia please send them to keithn@telocity.com.

NEWS

Channel Digest
Braun, Merisel, PC Connection, Forsythe, AnswerThink, E&Y, d&t, Digital River, etc.

Digital River said it has signed an agreement to provide complete e-commerce operations for TrueSpectra, the leading provider of image serving software. As part of the agreement, Digital River is hosting and managing the redesigned e-commerce site located at www.truespectra.com. Additionally, Digital River is providing transaction management, electronic software delivery (ESD), as well as physical product fulfillment, customer service, fraud prevention and e-marketing services. "We are excited to work with TrueSpectra to help make its e-commerce operation successful," said Jay Kerutis, Digital River's president of Software and Digital Commerce Services. "The company is leveraging our world-class infrastructure to efficiently manage many of the complexities involved in running an e-commerce operation. The breadth of our offering makes us an attractive option for companies that want to outsource their e-commerce operations so they can focus on their core competencies."

Forsythe Solutions Group launched an Information Technology Risk Management Practice that will help companies create less vulnerable, more recoverable and more secure IT infrastructures. The new practice will be part of Forsythe's Infrastructure Services Division led by David Nolan, former president of Comdisco Inc.'s Continuity Services and former chief operating officer of Telenisus Corp., a security services firm acquired by Forsythe in January of this year. With 31 years of experience in developing leading-edge technology infrastructures, Forsythe considers its IT risk-management group to be a natural evolution of its existing infrastructure services offerings. The IT risk-management group responds to a growing customer desire for high availability in the face of heightened threats of disruption. "In today's political and economic climate, business leaders are being held accountable," said Nolan, Forsythe's vice president of services. "Fiduciary responsibility requires executives to know their vulnerabilities and take appropriate action. Forsythe is uniquely positioned to identify risks and solutions without bias towards a particular technology or solution alternative." "The environment in which IT must support Business Continuity has changed dramatically during the last few years, and IT organizations find themselves challenged to bridge the widening gap between their capabilities and the demands placed upon them by the business," stated Bob Sibik, an industry expert who runs his own management consulting firm. "Forsythe is bringing a unique approach to Business Continuity by focusing on IT availability solutions that address the issues of transaction integrity and compute utility availability within the context of the business. Forsythe's services are further enhanced by the integration of their security expertise."

PC Connection is now offering the latest generation of handheld communication devices with comprehensive service plans by VoiceStream Wireless/T-Mobile. The new devices, including the BlackBerry 5810(TM) handheld, allow users to make voice phone calls, send and receive e-mail, surf the Web, check stock quotes, and more, all from a single compact unit. The devices represent long awaited "convergence" of cell phone and PDA functionality into one device. PC Connection is the first nationwide IT solutions provider dealing directly with VoiceStream to market comprehensive product-and-service packages for the new breed of handheld communication devices. The offerings are targeted for business users ready to upgrade from analog or first generation digital communication or paging systems. The VoiceStream Wireless/T-Mobile service plan, now available in partnership with PC Connection, will allow users access from a growing global cellular communications network that already covers more than 8,000 cities and 90 nations. "Industry analysts forecast that almost half of all business wireless data users will purchase centrally-managed service for their devices," said Robert Wilkins, Executive Vice President and head of PC Connection's Product Management group. "We recognize the value and opportunity in these trends and are meeting customer needs in real time." In addition to the advanced Blackberry 5810(TM) handheld, PC Connection carries all leading wireless equipment and accessories, including Nokia, Motorola, Samsung, Handspring Treo and Novatel. "But we expect the Blackberry to be the flagship product in this category because it offers a total integration of hardware, software and service with a very rich feature set," Wilkins said. Using a team of seasoned wireless experts, PC Connection advises customers on the best products and the right service plans to meet wireless needs and budgets. The team also arranges for asset tagging devices, launching service activation, and shipping the equipment overnight to customers. "The number of business wireless data users is expected to explode from around 7 million now to nearly 40 million in three years," Wilkins said. "The demands on mobile business users for rapid response to voice mail and e-mail are also increasing. We expect archaic technologies like paging to be replaced with wireless instant messaging in just a few years. In addition, encryption technology will make wireless direct-access to the Web and to corporate networks both secure and commonplace."

AnswerThink reported revenues for the second quarter of 2002 of $48 million compared to $73.4 million in the comparable period of 2001. The decline in revenues resulted primarily from the significant decrease in demand for interactive and online development initiatives and the completion of a major project at the Company's largest client. The net loss for the second quarter of 2002 was $1.5 million, or $0.03 per diluted share, compared to net income of $65,000 or $0.00 per diluted share in the second quarter of 2001. The Company's cash balance was $61.0 million at the end of the second quarter of 2002. For the first six months of 2002, revenues were $100.8 million compared to $155.0 million reported for the first six months of 2001. The net loss before the cumulative effect of a change in accounting principle for the first six months of 2002 was $2.5 million, or $0.05 per diluted share compared to a net loss of $135,000, or $0.00 per diluted share reported in 2001. "In a challenging market environment, we continue to differentiate ourselves by integrating the intellectual property of our Hackett Best Practices group, which maintains the world's leading repository of business process best practice strategies and metrics, into our core offerings," said Ted A. Fernandez, Chairman and CEO of Answerthink. "For example, we have now mapped best practices to specific ERP configuration decisions. This best practice-based implementation approach has been well-received by clients, who can realize increased return on their ERP investments. This trend is demonstrated by the fact that excluding the impact of the completion of a major project at our largest client, our revenues increased 5% in the second quarter when compared to the first quarter."

Fernandez continued, "Traditionally our business has been providing top-tier business and technology consulting to Global 2000 clients on a rate per hour basis. Our recently launched Hackett Collaborative Learning service, which sells annual subscription-based research and executive education services, is off to a great start. We plan to leverage the Hackett intellectual capital into this new offering and aggressively market it to its 2000 participants. We believe this represents a significant new revenue growth opportunity."

Ernst & Young and Guidance Software, the world leader in forensic and enterprise computer investigation software, today announced that they will work together to combine the strengths of Ernst & Young's online security practice and the capabilities of Guidance Software's revolutionary enterprise computer forensic investigation and incident response solution. The relationship will leverage Guidance Software's new EnCase Enterprise software to enable Ernst & Young's Security & Technology Solutions (STS) group to provide its clients with instantaneous incident response and network forensic investigation services. STS is a division of Ernst & Young's Technology & Security Risk Services group, which is comprised of more than 2,000 professionals around the world with world-class capabilities in minimizing risk and maximizing the security, maintenance and controls around digital systems. Encase Enterprise, a powerful and integrated solution for Enterprise Response, Auditing and Discovery (ERAD), will allow Ernst & Young to perform remote yet comprehensive network forensic investigations, enabling extremely powerful and efficient incident response and remediation the moment a potential internal security breach is detected. "Ernst & Young's use of the Encase Enterprise software will enable us to incorporate computer forensics as a critical component of our emergency response services practice," said Mark Doll, Americas Director of Ernst & Young's STS practice. "The current Encase forensic product is a natural choice for stand-alone computer investigations, and the new Enterprise Solution will enable us to provide greatly enhanced incident response services to our clients."

"In a time of economic and corporate uncertainty, Guidance Software and Ernst & Young are providing a powerful solution to combat both internal and external threats while enabling instantaneous incident response and proactive enterprise information auditing," said John Patzakis, president and general counsel of Guidance Software. "Once an organization implements Encase Enterprise, Ernst & Young's STS practice will be able to provide a cost-effective and cutting-edge incident response solution that can help protect a company's reputation as well as the bottom line."

Online Resources, a leading outsourcer of e-financial services, today announced it has signed three new reselling agreements with eCU Technologies, Southwest Business Corporation and United Datatronics. The companies will market Online Resources' Quotien(SM) suite of Internet banking and bill payment services to more than 1,250 financial institutions, primarily credit unions.

Northgate Innovations, formerly Mcglen Internet Group, reported its financial results for the second quarter ended June 30, 2002 and the six months then ended. The results reflect the operations of Lan Plus Corp. for the three and six months ended June 30, 2002 and 2001 and include Mcglen for the period March 15, 2002 through June 30, 2002. For the three months ended June 30, 2002, Northgate reported a $7.8 million increase in net revenues. Revenues rose 100 percent to approximately $15.6 million when compared with revenues of approximately $7.8 million for last year's comparable quarter. Gross profit for the quarter increased by $1 million or 52.6 percent to a second quarter record of $2.9 million from $1.9 million for the second quarter of 2001. Gross profit was approximately $800,000 higher than the first quarter of 2002, bucking the industry's historic trend whereby the second quarter is the seasonally weakest quarter of the year.

"We have enjoyed an improved marketplace for our products and the release of our new notebook, X-Book(TM), has been well received in our sales channels. We had one of the highest year-over-year sales growth rates in our channel in Q2 2002. Clearly, we are acquiring market share and outgrowing our competitors," commented Northgate's CFO Grant Trexler.

"We recorded a record second quarter gross profit of $2.9 million with a favorable product mix of notebooks and desktops. We also increased our operating profit by approximately $300,000, or 75 percent, achieving an operating profit of approximately $700,000 for the three months ended June 30, 2002 compared to approximately $400,000 in the second quarter of 2001," continued Trexler.

For the six months ended June 30, 2002, revenues increased $12.9 million, or 58.1 percent, to $35.1 million compared with $22.2 million for the first six months of 2001. Gross profit for the first six months of 2002 increased by $2.3 million, or 88.5 percent, to $4.9 million from $2.6 million for the six months ended June 30, 2001. Northgate recorded an operating profit of $300,000 for the six months ended June 30, 2002 as compared with an operating loss of $160,000 for the same period in 2001.

"We are pleased with the results for the first six months of 2002. Revenues, gross margins, and operating profits grew significantly as compared to the prior year. We continue to maintain good relationships with our key customers and are developing new relationships in the resale and the government/education channels, which we believe to be growth areas for Northgate," stated Richard Shyu, president. Shyu continued: "In addition, we delivered two exciting new products in the second quarter, the X-Book(TM) notebook computer and the newest version of our Integra(TM), a true 'all-in-one Solution,' powered by the Intel Pentium 4 processor and Microsoft (R) Windows(R) XP operating system.

Accruent, a leading provider of enterprise contract management solutions, said it has been named to Deloitte & Touche's "2002 Los Angeles Technology Fast 50" list, a ranking of the fastest growing technology companies in the region based on a percentage of revenue growth. A two-time recipient of this prestigious designation, Accruent ranked 18th on the 2001 Fast 50 list with a revenue growth rate of 541% from 1996-2000. "In today's economy, triple digit percentage revenue growth is an exceptional accomplishment," said Gary Dickey, partner, Technology, Media & Telecommunications group, Los Angeles office of Deloitte & Touche. "We commend Accruent for making the commitment to technology and delivering on the promise of market longevity. We are proud to honor Accruent as a Deloitte & Touche Technology Fast 50 winner for the second consecutive year." Accruent CEO Mark Friedman attributes the growth to the company's increasing desire to gain insight into the complex contract terms and conditions that drive their customer's organizations. "Today more than ever executives are looking for solutions that take the guesswork out of contract compliance and provide better visibility into their business while reducing risk," said Friedman. The problem is not going unnoticed as analysts predict the contract management software market will reach $20 billion by 2007. "While contract management solutions are in the early stages of adoption, we believe executives will accelerate their internal contract management initiatives as a core business process. This, in turn, will fuel the market opportunity for our solutions as contract management becomes increasingly important," said Friedman. "We'll continue to grow our business by increasing revenue and profitability and generating strong cash flow which allows us to invest in the company's future. To be recognized by Deloitte and Touche is a tremendous validation of our efforts, our growth strategy and our market space."

Braun Consulting, a professional services firm delivering customer-focused business solutions, said second quarter revenues before project expense reimbursements was $13.3 million, a decrease of 39.9 percent from revenue of $22.0 million for the same period a year ago. Total revenue for the second quarter of 2002, including reimbursable project expenses, was $14.7 million, a decrease of 39.3 percent from total revenue of $24.2 million for the same period a year ago. Pro forma net loss, excluding certain non-cash items and special charges of $3.0 million, was $1.1 million for the second quarter of 2002 or $0.05 per share, compared with pro forma net income, excluding certain non-cash items and special charges of $5.6 million, of $454 thousand or $0.02 per diluted share for the second quarter of 2001. "Our second quarter results were impacted by a combination of events, including a decrease in revenue from our largest client, Pharmacia; delays in project start-ups and project extensions at a number of our managed accounts; and the continued lengthening of the sales cycle," commented Steve Braun, President and Chief Executive Officer, Braun Consulting, Inc. "Revenue from Pharmacia projects declined significantly in the latter half of the second quarter. In addition, we expect the recently announced acquisition of Pharmacia by Pfizer to lead to a continued decline in revenue from Pharmacia. While we have successfully leveraged our experience with Pharmacia to build a substantial vertical practice around the pharmaceuticals industry, which includes Pfizer, in the near-term, we do not expect this to offset the continuing decline in the Pharmacia business."

"To minimize the volatility in revenue created by the loss of a significant client, we have invested in expanding the size of our managed accounts. During the first and second quarter of 2002, excluding Pharmacia, this approach yielded growth in our managed accounts," continued Braun. "And, while it will take time to adjust to the impact of Pharmacia/Pfizer, I am confident that our solution-oriented, account driven approach will continue to provide Braun with a competitive advantage against the undifferentiated strategy offerings and commoditized technology solutions of some of our competitors. Our ability to expand these accounts during the quarter, despite the marketplace challenges, confirms the strength of this approach."

Merisel reported second quarter ended June 30, 2002. The company reported net income available to common stockholders of $91,000, or $.01 per share, on sales of $17.8 million. Results were favorably affected by adjustments related to the company's wind down of its U.S. hardware distribution business, which reduced cost of sales by $810,000. For the second quarter of 2001, the company reported a net loss available to common stockholders of $24.2 million, or $3.02 per share, on sales of $116.7 million. Results for the second quarter of 2001 included an asset impairment charge of $29.4 million related to the sale of Merisel's Canadian distribution business effective July 28, 2001 and a loss from discontinued operations of $2.1 million. For the six months ended June 30, 2002, Merisel reported net income available to common stockholders of $179,000, or $.02 per share, on sales of $33.6 million. Results for the period were favorably affected by adjustments related to the company's wind down of its US hardware distribution business, which reduced cost of sales by $1.3 million, and include net income from discontinued operations of $1.1 million. For the first six months of 2001, net income available to common stockholders was $1.8 million, or $.22 per share, on sales of $279.3 million. Merisel's second quarter 2002 sales of $17.8 million reflect an increase in software licensing sales of 115% from $8.3 million for second quarter 2001 and 13% from $15.8 million for first quarter 2002.

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NEWS

Vendor Digest
Filemaker, Cisco, Imation, Salesnet, MCA Solutions, Red Hat, AMD, etc.

If you're looking into selling more volume software licenses than single SKU's, then the launch of FileMaker Pro 6 should have your attention. Leading workgroup database developer FileMaker announced its new FileMaker Pro 6, featuring easier-than-ever templates and tools providing the ability to import large numbers of images from a folder into a database, and, on Mac OS X only, capture digital images and image-data directly from cameras. FileMaker Pro 6 users can, for example, retrieve data from XML-enabled Web applications, import accounting data from QuickBooks, or query corporate databases without using ODBC drivers. With XML export, FileMaker Pro 6 users can share information with users of other applications; for example, exporting formatted FileMaker data in an email or into Microsoft Excel, or document-authoring applications. "The best just got better with FileMaker Pro 6," said Dominique Goupil, FileMaker president. "We've made it even easier for workgroups to manage data with solutions ranging from digital image catalogs to accounting systems to engineering projects. And integrated XML support greatly expands the horizons for gathering data into FileMaker and sharing information beyond the workgroup." FileMaker Pro 6 is available now for a suggested list price (SLP) of $299 (upgrade $149). FileMaker Pro 6 Unlimited is available for an SLP of $999 ($499 upgrade for licensed customers of FileMaker Pro 5 or 5.5 Unlimited). Volume license pricing is available. Licensed customers of FileMaker Pro 5.5 Unlimited may be eligible for a $350 rebate when upgrading through Dec. 31, 2002.

Check Point Software has expanded its highly regarded Check Point Certified Professional program to include a specialization in managed security services. The new Check Point Certified Managed Service Expert (CCMSE) certification provides advanced certification on Check Point Provider-1(TM)and Check Point VPN-1(R)/FireWall-1(R) implementations. "Most service providers offering managed security services use Check Point's Provider-1 to manage very large-scale security implementations quickly and efficiently," said Glenn Barlow, vice president, worldwide technical services. "Once CCMSE certified, employers are assured that their security administrator has the expert knowledge to set up, manage and maintain Provider-1 for optimal security management."

Imation has entered into a definitive agreement with DecisionOne to sell its North America Digital Solutions and Services (DSS) business. The transaction is expected to close during the third quarter of 2002, subject to normal closing conditions. While the purchase price was not disclosed, Imation expects the 2002 impact of this transaction to be approximately break-even in terms of both income and cash flows. Under terms of the agreement, DecisionOne will purchase Imation's service business and document management business in the US and Canada, including the DSS facility in Pine City, Minn. DecisionOne, the largest independent provider of multivendor information technology support in North America, said it intends to manage the acquired business and 3000 North American customer base as a strategic business unit and add to its portfolio of other technology service clients. (See DecisionOne To Acquire Imation Digital Solutions And Services Business, Business Wire, August 8, 2002.)

"This transaction allows the DSS business to achieve the greatest value for its customers and employees by joining an organization solely focused on technology based services. For Imation, it sharpens our focus on building the value of our core data storage removable media business," said Bill Monahan, chairman and chief executive officer of Imation.

"The acquisition of Imation DSS is part of our strategy to broaden the base of technology that DecisionOne supports and to leverage our assets and efficient operating infrastructure into new markets and new technologies," said George De Sola, chairman and chief executive officer of DecisionOne.

Salesnet and sales management training firm CustomerCentric Systems, announced their partnership. Customers who are trained on the CustomerCentric Selling(TM) sales methodology can now reinforce these best practices through Salesnet's process-oriented SFA solution. The end result is a more consistent, predictable sales process that drives more accurate sales forecasts, better pipeline visibility, improved sales execution, and tighter pipeline management. CustomerCentric Systems, LLC was co-founded by sales guru Mike Bosworth, author of "Solution Selling(R): Creating Buyers in Difficult Selling Markets" and co-author of "CustomerCentric Selling(TM): The Message Driven Sales Process"(TM). Bosworth and his partners, Frank Visgatis, Gary Walker and John Holland, co-developed CustomerCentric Selling(TM), a sales methodology designed to overcome the challenges of selling solutions in today's competitive marketplace. The concept is based on the premise that, regardless of industry, the needs, goals, and value to the customer are more important than the specific product or service features during the decision-making process.

"This is a very powerful partnership," explained Frank Visgatis, co-founder of CustomerCentric Systems, LLC and co-author of the new sales methodology. "CustomerCentric Selling(TM) works with customers to define the most effective way to sell, and Salesnet's SFA solution helps to drive that sales process across the organization. The power of Salesnet's solution -- its proprietary Process Builder technology -- combined with our historic focus on the importance of sales as a process makes them the perfect partner for us."

"Often, sales people who learn new skills during training sessions find it difficult to follow those new skills once they get back to their every day jobs," explained Ron Martin, vice president of sales operations and alliances at Salesnet "Our Process Builder acts as a virtual sales coach, walking sales people through each step of the CustomerCentric Selling(TM) process and ensuring that next steps are posted automatically to their online calendars."

Building on its global channels strategy to provide channel partners with the resources, tools and programs to help increase profitability, Cisco Systems announced the availability of its Converged Network Investment Calculator (CNIC) to all IP-Telephony specialized channel partners. "End-users have told us again and again that identifying the bottom-line benefit when evaluating new technologies is a priority given today's economic climate," said Ken Presti, industry analyst for IDC. "Effective return on investment tools can serve as a key element to the sales process because they offer a means for customers to measure the long-term value of new technologies like IP Communications. Cisco's return on investment tool is an elegant response that can play a very meaningful role in persuading customers to invest in new technology."

"Sentinel's success has been closely linked to our ability to successfully justify to our customers the financial benefits of a converged AVVID (Cisco's Architecture for Voice, Video and Integrated Data) solution," said Robert Keblusek, vice president business development at Sentinel Technologies, Inc., a Cisco IP-Telephony Specialized Channel Partner in Downers Grove, Illinois. "The Cisco ROI calculator has provided us an additional tool to assist in quickly justifying our proposals. Using financial, technical and strategic justification Sentinel has been able to successfully sell Cisco solutions in a very tough economy."

Cisco channel partners with the IP-Telephony Specialization now have access to the same tool Cisco itself currently uses to provide its converged network customers with a return on investment analysis. Over the past eight months, CNIC has been used with more than 1,000 Cisco customers. Cisco IP-Telephony specialized channel partners interested in learning more go to http://www.cisco.com/partner/cnic/

"We view our channel partners as essential to our company and we are delighted to provide them with the tools, resources and programs, such as the Converged Network Investment Calculator to help them succeed," said Surinder Brar, senior director of marketing for Worldwide Channels at Cisco. "Enabling our IP-Telephony specialized channel partners to quickly provide a return on investment analysis to their customers is an important requirement in today's market."

MCA Solutions, the leading provider of optimization solutions for the service supply chain, received $4 million in first round funding from Longworth Venture Partners and Battery Ventures. The funding will enable MCA Solutions to expand its sales and marketing infrastructure, and accelerate expansion of the product suite. MCA Solutions also announced today that Longworth Venture Partners' Paul Margolis and Battery Ventures' Dave Tabors have joined the Company's board of directors. "Service parts forecasting and inventory optimization are huge challenges for enterprise businesses and can have a dramatic effect on a company's operations and service levels," said Dave Tabors, general partner, Battery Ventures. "MCA Solutions is unique in its approach to solving the business and technical challenges of the service supply chain. MCA Solutions has the proven technology, solid customer base, and strong management team that we look for when investing in new companies and we are confident that it will continue to be the leader in the service supply chain marketplace." MCA Solutions provides advanced enterprise planning software and delivers state-of-the-art assessment and implementation services. Its Service Parts Optimizer (SPO (TM)) suite empowers enterprises to set standards for asset utilization and customer service leading to a superior return on investment. MCA Solutions' technology helps companies enhance their value chains by implementing innovative solutions that provide customers with software and services that optimize visibility and flexibility in their sales service value networks. After successful rapid, and large-scale, implementations at Cisco and other high technology companies, MCA Solutions is ready to deliver its product to a broad customer base. Vertical markets that can benefit from SPO implementation include; aerospace and defense, electronics, semiconductor equipment, telecommunications, medical equipment, automotive, industrial equipment, as well as other markets with a global installed base of mission critical products.

"Providing timely and efficient service is an increasingly important competitive differentiator for many large manufacturing and technology companies," said Morris A. Cohen PhD, cofounder and CEO. "Our technology enables companies to meet the demanding requirements of the service parts planning process to reduce operating costs and provide global visibility throughout the extended service supply chain. This round of funding provides us with the capital necessary to implement the sales and marketing initiatives necessary to expand our technology and customer base and achieve a leadership position in the service supply chain market."

InnoCentive, Inc., the first online forum that allows problem solvers and those seeking innovative solutions to collaborate in a worldwide scientific community, today announced the appointment of Ali Hussein as vice president of marketing. Hussein joins InnoCentive from Amazon.com where he was director marketing and business development for the company's wireless initiative enabling 25 million customers access to Amazon.com over wireless devices. In his more than 18 years of experience in international business, marketing and sales, he has advised various startups working on globalization technology.

Onyx(R) Software, a leader in CRM, said that State Street has selected the Onyx customer relationship management (CRM) solution as its global CRM standard to provide a shared base of information about clients' relationships with State Street. State Street will implement the Onyx solution worldwide across multiple divisions, including sales and marketing, relationship management, and client service. The company intends to use Onyx as a tool in building and enhancing client relationships and measuring the effectiveness of sales, marketing and service activities. The Onyx system that State Street will deploy offers a single digital work space for employees to access critical client data, along with relevant information from other business applications. Built entirely on Internet technologies including XML, the solution is completely Web-based, integrates fully with other enterprise applications, and is designed with usability and cost-effectiveness in mind.

Zomax, an international outsource provider of process management services, and Intraware, a leading provider of global electronic software delivery and management solutions, jointly announced today that they have entered into a strategic alliance in which Zomax will market and resell Intraware's flagship SubscribeNet ESDM service to its global customer base through an OEM and royalty agreement. Zomax has also invested $5 million dollars in a private equity placement for an ownership stake of approximately 12%. "We see the demand for electronic software delivery and management growing within our customer base," said Jim Anderson, Zomax Chairman and CEO. "By licensing Intraware's proprietary ESDM solution, we will provide a complete turnkey solution. The addition of SubscribeNet to our physical fulfillment, delivery and management options enhances the depth and breadth of our product offering. Intraware is the acknowledged leader in the ESDM space providing their services to clients such as Sun Microsystems, Documentum, and PeopleSoft."

"Aligning our strategic and financial interests with Intraware gives Zomax a competitive advantage which helps us maintain our leadership in the market," Anderson continued. "The addition of electronic delivery to supplement physical delivery will accelerate over time, and this relationship with Intraware assures our participation in the emergence of this new software delivery option."

"We carefully examined the supply chain management outsource industry and identified Zomax as our optimal partner," said Peter Jackson, Chief Executive Officer at Intraware. "We are pleased to partner with the leading provider of physical delivery and management solutions. Intraware now has access to Zomax' outstanding customer base, which includes the top tier blue chip companies in the industry."

Under the strategic alliance agreement, Zomax will pay a minimum of $15 million in fees to Intraware over 10 years, subject to certain conditions, including Zomax's right to cancel the agreement at any time on one year's notice. In addition to the strategic marketing alliance, Zomax invested $5 million in a private placement of common stock at $0.82 per share, representing approximately 12% of the outstanding shares of Intraware.

FOCUS Enhancements, a leader in video production and conversion technology, today announced financial results for its second quarter ended June 30, 2002. Revenue for the second quarter was $4.5 million, compared to $6.5 million reported for the same quarter of 2001. Net loss for the quarter was $1.5 million or $0.04 per share versus a net loss of $1.0 million or $0.03 per share for the 2001 period. Revenue for the six months ended June 30, 2002 was $9.3 million, compared to $11.5 million reported for the six months ended June 30, 2001.

Science Applications International Corporation announced that Randy Walker has been named corporate executive vice president to oversee the company's commercial and international business activities reporting to Dr. J. Robert Beyster, SAIC chairman and chief executive officer. Walker has more than 17 years of experience delivering leading-edge information technology (IT) services and building world-class delivery organizations throughout the Americas, Europe and Asia Pacific. "Randy has established himself as a senior services executive capable of building and directing large services organizations in the domestic and international arenas," said Dr. Beyster. "With his extensive knowledge in the IT services industry, coupled with his commercial acumen, we look forward to Randy's leadership to expand SAIC's commercial business opportunities abroad as well as domestically."

Red Hat and AMD announced that Red Hat will offer global support for the upcoming AMD Opteron(TM) and AMD Athlon(TM) processors based on AMD's Hammer technology in Red Hat Linux Advanced Server, and future enterprise Linux offerings from Red Hat. Red Hat will provide native 64-bit support for processors based on AMD's x86-64 technology, while providing support for existing 32-bit Linux-based applications. "Red Hat and AMD share the goal of providing customers powerful, fast and affordable enterprise solutions based on industry standards," said Paul Cormier, Executive Vice President of Engineering at Red Hat. "The combination of Red Hat Linux Advanced Server and AMD's x86-64 technology will provide a logical migration path for enterprise customers seeking to move off RISC/Unix."

"The combination of Red Hat Linux Advanced Server operating system and the upcoming AMD processors based on Hammer technology is designed to provide customers enterprise-class servers and workstations with a combination of power and price that has not existed before," said Rich Heye, vice president, platform engineering and infrastructure, AMD's Computation Products Group. "A range of customers with data-intensive applications are ready for the performance of 64-bit computing, and the AMD-Red Hat combination is intended to provide a mainstream solution as new applications become available across consumer and enterprise customer segments."

RESEARCH Ideas and Opportunities By Gartner

Sponsored by:

The need of knowledge workers to better collaborate, control and manage business content internally as well as with business partners has sparked the emergence of smart enterprise suites. The market is beginning to emerge, and by 2005, Gartner forecasts that worldwide smart enterprise suites revenue will reach $1.5 billion. Gartner defines smart enterprise suites as the convergence of portal, collaboration and basic content management functionality. Other knowledge management capabilities, such as expertise location and e-learning, may also be included. By 2005, smart enterprise suites will replace portals and team-collaboration support products as the focus of investment within a majority of businesses.

"The explosion of unstructured data types is overwhelming the management infrastructure of many businesses," said French Caldwell, vice president and research director for Gartner. "That problem is negatively affecting the productivity of individuals as well as the overall competitiveness of businesses. Smart enterprise suites will provide a way to organize and make sense of all the information and knowledge scattered throughout the enterprise."

By 2004, smart enterprise suites will emerge as a combination of the functionality currently offered by portals, team collaboration support, and content management, and will cause major disruption in those markets, according to Gartner. During the next three years, the delivery of smart enterprise suites will occur as vendors continue to service customers' short-term demands while at the same time incrementally building toward longer-term strategic differentiation.

"We expect vendors to make conservative investments designed to round out their product functionality during the next few years," said Caldwell. "In some cases, those investments will be driven by a particular customer requirement, and once the functionality has been built, it is then ready for market."

Gartner predicts that heavy demand for smart enterprise suites will occur once IT infrastructure and e-workplace application investments take on a greater strategic role. User needs for richer targeted content will also influence the evolution and demand.

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RESEARCH

PC Update from Gartner/Dataquest

While hopes were raised in the first quarter that the PC industry was showing the first signs of recovery, the industry suffered a slight setback as worldwide PC shipments in the second quarter of 2002 declined 0.6 percent from the same period last year, according to preliminary results from Dataquest Inc., a unit of Gartner. Worldwide PC shipments totaled 29.9 million units in the second quarter of 2002 (see Table 1), while PC shipments in the United States reached 10.6 million units, a 0.8 percent decline from the previous year.

"The market undoubtedly saw the effects of inventory overhang from the first quarter, but at the same time we have yet to see any significant return to corporate buying, and in the consumer market buying appears to have fallen back further in some regions," said Charles Smulders, vice president of Gartner Dataquest's Computing Platforms Worldwide group. "Economic uncertainty continued to undermine business confidence, which has been further compounded in the United States by the Enron and WorldCom MCI accounting scandals."

The combination of Hewlett-Packard and Compaq moved it into first place in the worldwide rankings, but just 0.6 percentage points higher than Dell. While the new HP gained the No. 1 position in the quarter, it experienced a 16.1 percent decline in shipments.

"HP's decline is based on three factors: first, inventory adjustments being made during the integration process; second, its reliance on the weak performing US retail segment; and third, business disruption as a result of the merger process," Smulders said. "We expect the third and fourth quarters to be a better measure of the success of the merger strategy." Dell was the only top five vendor, both worldwide and in the US, to experience double-digit growth in the second quarter. Gartner Dataquest analysts point out that Dell continued to sharpen its efficiency, as it achieved 9.9 percent operating expenses of revenue during its fiscal year 2002, which ended May 3. It was the lowest operating expenses of revenue in Dell's history as well as any other PC vendor.

The EMEA region experienced a slight shipment decline of 0.3 percent in the quarter, while Japan dropped 12 percent. Asia/Pacific and Latin America showed single-digit growth rates of 5 percent and 4.3 percent, respectively. Gartner Dataquest analysts said the excitement of the World Cup soccer tournament impacted some retail sales in Asia/Pacific, Japan and Latin America as some consumers focused on the games instead of buying PCs.

"Vendors should plan for worldwide unit shipment growth to be approximately 2 percent to 4 percent in 2002, down from our previous estimate of 5 percent growth. Vendors must capitalize on DVD drive and graphics chip technology to draw consumers to their products in the fourth quarter," Smulders said.

Table 1
Preliminary Worldwide PC Vendor Unit Shipment Estimates for 2Q02 (Thousands of Units)

Table 2
Preliminary US PC Vendor Unit Shipment Estimates for 2Q02 (Thousands of Units)

Special From ARS Research: How small is too small?
By Amy Wiyninger Research Analyst, Digital Cameras

Over the past couple of years several different digital camera manufacturers have claimed the title of "world's smallest," "world's lightest," and "world's thinnest," with some even boasting all three! Many of these ultra-compact and super thin cameras are small enough to slide into a shirt pocket, drop into a purse, or maybe even slip into a wallet. The recent announcement of the new ultra-small xD-Picture Card will allow digital camera manufacturers to develop yet smaller and smaller digital cameras; but how small do we really need these cameras to be?

The new XD-Picture Card format was developed jointly by Fujifilm and Olympus and is the smallest memory card available measuring 20mm x 25mm x 1.7mm. The XD-Picture Card is scheduled to be available in August in capacities of 16, 32, 64, and then a 128MB card in September. A larger capacity 256MB memory card is promised to arrive in December with prices for the new xD card estimated to be similar to SmartMedia. Fujifilm and Olympus report that even higher capacity cards of 512MB, 1G and larger will be available beginning in 2003. Fujifilm has already announced five new digital cameras supporting the new XD-Picture Card format and many more XD-Picture Card digital cameras are expected to be announced in September. Currently only Fujifilm and Olympus will be marketing the memory card, but other digital camera companies have reportedly been invited to join them.

Many technologies have developed ultra-compact and very portable products, following the mentality that bigger is not always better. Some photo printers are small and portable, giving both photographers and the average consumer the ability to print photos of their favorite images while on the go. Televisions are no longer huge boxes but are now sleek flat panel screens that hang on the living room wall -- and cell phones are as small as a candy bar. These other product categories, as with the digital camera market, have found success by offering smaller, thinner, and lighter products--but there comes a point where bigger is sometimes better.

While these small cameras are important to those users who are constantly in motion and find it difficult to lug around a large camera bag, functional and easy to use cameras are equally important. With still smaller memory cards and smaller cameras, come smaller buttons to operate the camera and its functions. Many users will likely find it very frustrating to navigate through a menu system using a button no larger than an eraser on a pencil. Toshiba is one manufacturer to find a way around this problem by incorporating a touch screen LCD to operate all of the menu functions on the small and compact PDR-T10. Another problem with the ultra small and compact cameras is how exactly to position your fingers while trying not to get a thumbprint in your picture during that once in a lifetime moment. While one of the greatest advantages of digital is that you can always delete the bad shots, you will never get that moment back. So, you could be left with your son's first homerun in little league with a large thumbprint covering his face.

Along with the smaller cameras that have been made possible with the XD-Picture Card, will also come smaller LCD screens to view the pictures. One of the most exciting parts of digital cameras is the ability to see the picture of your new baby cousin the second after you snap the picture. Who wants to look at baby Jacob on a small 1-inch LCD screen? The addition of the XD-Picture Card to a growing list of memory formats consisting of CompactFlash, SmartMedia, Memory Stick, and SD/MMC will not only confuse consumers with too many choices, but also will raise the risk of compatibility issues and current storage limits. Even though the thought of owning the world's smallest, thinnest, lightest digital camera may sound appealing to many, these ultra-compact cameras are not expected to be the most practical solution. While the new miniature XD-Picture Card promises the development of new miniature digital cameras, how small do these cameras really need to be? The answer is small enough to be convenient, but large enough to feel comfortable to the user.

SMB SWEET SPOT

For Resellers, Services Is Where It's At…And the future is SMBs
By Steve Giles, President and CEO, Oculan

It's no secret that traditional value-added resellers (VARs) have been getting squeezed for years by shrinking margins in the ultra-competitive hardware market. It seems every day there are VAR executives somewhere announcing plans to restructure their business and rededicate their employees to a new mission-one focused on services rather than product.

And why not? The evidence is very persuasive, indeed undeniable, that moving to a services-based business model is the right thing to do. Even as we trudge through the rubble of a technology sector brutalized by the dot.com bomb and subsequent recession, the trend toward IT outsourcing has continued unabated, a lone bright spot on an otherwise somewhat barren economic landscape. That's why I formed my company, and why you should be looking at providing services and outsourcing to find new revenue.

The Services Trend

In September of 2001, Hewlett-Packard reported that its outsourcing business was up 27 percent for the year, and that it expected further increases in the wake of the attacks on September 11 and the anticipated uptick in demand for off-site data warehousing, security services, and other needs. Likewise, IBM Global Services reported last year that it had a $97 billion dollar service contract backlog in its services operation. IBM also stated that there had been no layoffs due to any fall-off in outsourcing, and that it planned to add between 10,000 and 20,000 new employees in its services business this year alone.

Now I'm no economist, but I think I understand that where a $97 billion backlog exists-at one company alone-there also exists a market opportunity. And as someone who has had extensive professional experience working for a global services provider in the "enterprise" market, I think I also know where that market opportunity is greatest.

No, it's not in the large and well-served enterprise market. Been there, done that. It's the underserved "SMB" market-you know, the small- to mid-sized organizations that just started becoming "network dependent" in the past several years. As the Internet has proliferated and networks, applications, and computer technologies have become pervasive elements of our economic infrastructure, the people who own and run SMBs have come to realize that maintaining the health and security of the networks and their entire IT infrastructure is a basic cost of doing business…..or not doing business, as the case may be for those who ignore this new SMB business imperative.

The SMB Opportunity

Ever so slowly but surely, the market is beginning to respond to this opportunity. The HPs and IBMs of the world, VARs large and small, solution providers, systems integrators, IT consulting practices, even giant telecom companies-many are launching or thinking about launching new business initiatives focused on providing IT services and support to the burgeoning SMB market. Oculan and a handful of other newer companies have already developed and launched innovative new solutions for the SMB market in the hot areas of network security and management.

According to the Small Business Administration, there are 25.5 million SMBs in the United States today. To me, that's "burgeoning". Those 25.5 million small businesses employ more than half the country's private work force, create three of every four new jobs, and generate a majority of American innovations. In a recent study by Enterprise Management Associates (EMA) of SMBs that currently use outsourced IT services, EMA found that 32 percent expect their spending on outsourced IT services to rise 10 percent or more over the next year. Another 42 percent indicated that their spending on outsourced services would increase up to 10 percent. Again, to me that qualifies as "burgeoning", especially during a weak economy.

Yes, today most SMBs have desktops, networks, systems, and security issues that need to be managed, just like the large companies do. So how do you go after this SMB market? What do SMBs need, and what can they afford? What tools do you need? Who do you partner with to meet those needs? We'll look at those questions and their answers in the next edition.

Oculan provides an appliance-based network management platform that enables SMBs and larger organizations to manage and secure their networks at a fraction of the cost and complexity of traditional software solutions. Voted "Best New Company", "Most Innovative Networking Technology", "Best Channel Program" and numerous other awards by IT executives in 2002, Oculan provides a monthly subscription service to monitor and manage security, desktops, network devices, system, vulnerability scanning and other net management functions.

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FROM THE COMMUNITY

Changing Channels: Sometimes, I just don't get it!
By Steve Cross

Here's what I don't get about our industry. Sometimes we keep on saying stuff that we know is complete BS. According to CNET News "Linux lost some ground to Windows last year, but are expected to climb in coming years..."

I have no idea what these guys are thinking, because also according to CNET, IDC says that Linux sales were down 5% last year and Windows sales were up 11%. That makes the swing 16%. If you are a Linux supporter, distributor, or fan, you better start worrying. This is the same effect Microsoft had on Apple, Palm, and at least 20 other companies.

Let me describe what it feels and looks like. First the target feels invulnerable, then well-defended, then under siege, then under attack, then underwater. Palm used to have a 90% market share, but now the PocketPC devices have them on the run. Their marketshare is probably under 50% by now. Watch for when it drops off the cliff, which is a real effect, sometimes known as a tipping point. When that happens, there is no rescue, no comeback. Game, set, and match. Over.

Heck, does anybody remember when Apple Powerbooks were the number-1-selling laptop line? Microsoft iterated and iterated Windows until it was GREAT! In doing so, they drove Apple over the cliff. Now Apple is a marginal player, with a few cool products. By the way, during the years, I have used CPM, MPM, DOS, UNIX, Mac Os, Windows 2, 3.1, 95, 98, and now Windows 2000 Professional. Up until now, the Mac Os was always the best I'd ever used. No more. 2000 is rock-solid, rock-steady. No crashes on my (very cool, very lightweight, very thin) Sharp UM10 laptop since the day I brought it home almost 5 months ago. It just works. And that's how Microsoft does it.

Microsoft will kill you with iteration. Just when you think you are defining a product niche, or a market, they will start cranking up their iteration engine. Watch for the reference design of their smart phones. They will be killing players in the smartphone space. Should be interesting to watch. Glad I sold my Nokia stock at 24.

Steve Cross can be reached at steve@crosschannel.com, 702-492-7472. Watch for his upcoming book.