Wall Street Journal - Intel CEO Extols Patience; Yahoo Stresses Personalization; Blogger Take Center Stage

Intel CEO Extols Patience;
Yahoo Stresses Personalization;
Bloggers Take Center Stage

By JASON FRY
THE WALL STREET JOURNAL ONLINE
May 25, 2005 11:43 a.m.

This notebook contains highlights from The Wall Street Journal's D: All Things Digital conference, which was held Sunday through Tuesday.

Paul Otellini, the new CEO of Intel Corp., showed off a number of whizzy demonstration products and discussed a number of innovative uses for his company's chips, from desktops for the Chinese market to WiMax, which would offer much broader "hotspots" for wireless access. But consumers will have to be patient.

On Tuesday at the D: All Things Digital conference in Carlsbad, Calif., Mr. Otellini displayed a sleek PC that doubles as a tablet. It is being sold to Chinese consumers -- a market Mr. Otellini noted includes 60 million urban households that have the money and desire to buy a PC, but haven't. He also showed off a management console for Chinese Net cafes that could serve as "IT in a box" for small businesses, and a thin, light, silver desktop. "The desktop machine needs to be reinvented," he said.
[Paul Otellini]

That prompted a question from Wall Street Journal columnist and conference co-host Walter S. Mossberg: Why are Intel's demo products always cooler than the actual products its customers make?

"Part of the problem is today the desktop [computer] business is a zero margin business for many of our customers," Mr. Otellini said, noting that has led to a chicken and egg problem: the lack of a perceived customer base has starved investment. "A, people have to buy them and B, people have to build them," he said. (He did add that he thinks the increasing popularity of notebook PCs could break desktop design out of its rut.)

Patience is the rule elsewhere, too. Mr. Otellini touted the potential benefits of WiMax, which can supply wireless access in a 50 kilometer radius. But while he said 75 trials are underway, with some roll-outs planned for early next year, he warned regulatory issues about spectrum will play a role, and WiMax being pervasive is "a number of years off."

Unfortunately, so are hardware-based answers to security problems affecting the Wintel platform. Mr. Otellini ran down a series of hardware-based steps designed to improve security, articulating a vision of "virtualization" technology that keeps a virtual machine built into a PC isolated, and thus safer from attack, hardens that machine against hazards, and provides for remote repair after an attack.

But asked when such solutions would be available to mainstream users and usable by them, Mr. Otellini said "I think we're still a few years away." The problem can't be solved by hardware alone, he noted -- hardware solutions take years to be adopted, and remote recovery of a PC, for example, will require service providers to offer that.

Pressed about security by Mr. Mossberg, Mr. Otellini had a startling confession: He spends an hour a weekend removing spyware from his daughter's computer. And when further pressed about whether a mainstream computer user in search of immediate safety from security woes ought to buy Apple Computer Inc.'s Macintosh instead of a Wintel PC, he said, "If you want to fix it tomorrow, maybe you should buy something else."

Yahoo Stresses Personalization Plan

Trying to sum up Yahoo Inc.'s strategy going forward, co-founders Jerry Yang and David Filo lean heavily on a single word: personalization.

Interviewed during the final session at D: All Things Digital conference in Carlsbad, Calif., the two Internet pioneers were asked how they would respond to a barrage of products from heavyweight competitors such as Microsoft and Google Inc. Microsoft's Bill Gates, for example, had earlier showed off a new product called Virtual Earth that includes aerial images with mapping software.

Mr. Yang admitted that Yahoo would almost certainly follow suit with its own aerial-imaging service. "The feature race is on, there is no question," he said.

But Yahoo is likely to try to enhance such a service with submissions from others, perhaps combining existing images with landmarks or features that are designated by users or businesses, the two men said.
[Jerry Yang]

A much bigger battle looms over search, Google's primary business, which Microsoft's Mr. Gates also has described as a major point of focus for the software giant. Yahoo, which began ago as a directory based on recommendations from its staff, also expects to drive search technology forward by making searches more relevant based on a user's interest or preferences, "what you've said you like and what you've said you don't like," said Mr. Filo.

The two men, who reminisced about past successes and failures for the 10-year-old company, also said building new connections to users will be key to the success of their just-launched music service, which made a stir for its low price of $6.99 a month. Steve Jobs, Apple's chief executive, said Sunday there was a running bet inside his company about how soon Yahoo would raise their pricing.

Mr. Yang conceded that the company described its initial price as "introductory," while not specifying any potential change. He was quick to point out, however, that Yahoo also has a running bet about when Apple will start a subscription service in addition to selling individual song downloads.

More important, Mr. Yang argued, will be other ways to engage users to contribute to its music service in ways that will cause users to stick with Yahoo's site and reduce "churn" -- a costly tendency of customers to jump from service to service. "We are really working to drive sustainable stickiness," he said.

--Don Clark

Bloggers Debate Media, Rise of Blogs

On the third day of the D: All Things Digital conference in Carlsbad, Calif., the bloggers had their day, or at least their morning, debating how more-established media should react to the rise of blogs, and noting how blogging itself has changed.

"Never underestimate journalists' desire to read about themselves," said Ana Marie Cox, editor of Wonkette.com, who took pains to examine why blogging is different from traditional media and how it isn't.
[Ana Marie Cox]

Ms. Cox called herself the person in the center of a happy media orgy. But amid the jokes about Wonkette's liberal use of cuss words, she noted that the site offered the kind of inside-the-story banter with a nasty edge that's ubiquitous in newsrooms, but only lives at the edges of traditional newspaper accounts. Calling that gossip misses the point of why it's so interesting, she suggested. "You're trying to figure out why people are doing what they're doing," she said, adding that "Washington is a very conservative town, it has a very conservative media -- not in a political sense, but in a sense of what is proper."

Ms. Cox also noted how blogs themselves are changing, observing that more-political blogs that have served as watchdogs on the mainstream media now look more like that segment of the media themselves: "They're cliqueish, they're arrogant, they get things wrong." As an example, she cited the Power Line blog (www.powerlineblog.com), whose investigations helped debunk the now-notorious CBS memo about President Bush's National Guard service, but which then got "memo-happy" in the case of the Republican strategy memo on Terri Schiavo, decrying it as a fake. GOP Sen. Mel Martinez later said an aide had written the Schiavo talking points.

"They wouldn't back down -- just like CBS," she said. (In an interview Wednesday morning, Power Line's Scott Johnson disputed that assertion, saying the blog was quick to link to a Washington Post story that identified the memo's author, and also published an examination of Power Line's role in the flap.)

Dan Gillmor, the former San Jose Mercury-News columnist who founded Grassroots Media Inc., noted that pressure on old-line media is not coming just from the greater choices in what to read, but in how readers interact with what they read.

"People have all these new options in terms of where they get what they want and how much they want to participate," he said, comparing what's happening in journalism to "bringing the conversation into what had been a lecture," with readers now talking back to journalists.

Mr. Gillmor ascribed some of the discomfort among journalists to the fact that "we are being watched like hawks," but had faith that journalism will be the better for it, noting that "people who think I'm wrong tend to be the ones I learn from, not people who think I'm right."

Mena Trott, co-founder of Six Apart, which created the TypePad service and Movable Type software, sought to remind the audience that not all blogging is made for a national or even international mass audience, observing that "I had no ambition to write in a political form … I was the chief egotist at my house."

Ms. Trott said blogs' average connection is about six people and called herself an "accidental entrepreneur," noting that her desire to tell stories about her family and her childhood led her to create a software product.

Ms. Trott's advice for established media was to start small and go slow in adapting to the blogging world: For example, let readers join the conversation in areas away from politics that are of interest to them, such as dining.

"That's a really good way to get your feet in the water and not get attacked," she said.

Ms. Cox noted the "neverending frenzy" of blogging, observing that Powerline and related sites are now being themselves watchdogged by another generation of bloggers. She compared blogging to the self-renewing tumult of punk rock: People at the top will get commercialized, but "there's always someone in the garage."

Publishers Grapple With Industry Changes

Following the bloggers, it was the turn of the mainstream media: Donald Graham, chairman and CEO of the Washington Post Company; Peter Kann, chairman and CEO of Dow Jones & Co., publisher of the Online Journal; and Tony Ridder, chairman and CEO of Knight Ridder Inc.

While all three men evinced enthusiasm for blogs – Mr. Graham said blogging "literally takes us back to the roots of newspapers" with one-man operations like Ben Franklin's – that's not to say they don't have reservations.

Mr. Kann said he thinks there's a fundamental difference between blogging and traditional journalism. "You ought to have a certain degree of trust" that news and opinion are separate, hidden commercial agendas aren't influencing the news, and that reporters and editors are trying to find the truth, he said. "I think there is a difference," he said, adding that "I'm not sure that viewing this as a blended continuum is the best way to look at it."

Or as Mr. Graham wryly noted, in the blogging world there's "one person who's Ben Franklin and 100,000 people who think they're Ben Franklin."

Beyond blogging, all three sought to grapple with being a business in transition: print readership is declining, online readership is gaining, and a business model has to emerge from that change.

All three tried to portray that change as a challenge, not a problem.

"If we're in trouble, shame on us," said Mr. Graham, noting that making a business out of the combination of print and Web sites is "a harder job" than the standalone newspaper business, "but not impossible." Mr. Graham said 82% of adults in the Washington, D.C., area read either the print Post, the free Express paper or the Post Web site each day, blaming the decline in print readership on population growth far from central D.C., the fact that younger readers may not read or choose to read online, and language barriers with new arrivals.

Mr. Ridder noted that 53% of adults in the U.S. read a daily newspaper – down from 62% in the late 1980s, but still a large number. And he sought to put things in context, saying that Knight-Ridder's biggest challenges were with its largest eight or nine newspapers, with essentially no impact on smaller, more-rural papers. "It is a big-city phenomenon," he said. He also saw struggles to capture younger audiences as nothing new, expressing faith that "as people grow up, as they get into the community, as they're affected by the community, they tend to become newspaper readers."

"I think the key is, do we capture those people who may be migrating away from print within our own publishing franchises," Mr. Kann said, talking of the "inevitable, gradual" migration to the online world. He added that he can imagine the Online Journal's circulation (currently it has 731,000 paid subscribers) equaling that of the print Journal (which currently has 1.8 million subscribers) and said that "I don't regard that as particularly threatening."

Speaking of Dow Jones's decision to begin charging for the Online Journal in 1996, Mr. Kann said that "I don't think we were particularly visionary – I think we were rather traditional" in thinking that Dow Jones's proprietary content had value. In fact, Mr. Kann said he thinks publishers in general have underpriced their products.

"No one in this room thinks twice about spending $2 buying a bad cup of coffee walking through an airport," he said, adding that "we're probably all too cautious about raising subscription prices."

Scott McNealy Sounds Off

Sun Microsystems Inc. Chief Executive Officer Scott McNealy owns one of tech's sharpest tongues, with an aw-shucks, Jimmy Stewart delivery that makes the razor edges on his quips bite deeper.

Sun's decision to make peace with Microsoft Corp. more than a year ago gave Mr. McNealy's company some $2 billion in cash, which probably took the sting out of the fact that he was expected to lose some of his best material: According to various McNealy gibes over the years, Microsoft is run by "Ballmer and Butthead" and its Windows operating system is "a welded-shut hairball."
[Scott McNealy]

But peace didn't exactly leave Mr. McNealy with nothing to say. At the D: conference, his conversation with Wall Street Journal columnist and conference co-host Kara Swisher ranged from what Sun will do with $7.5 billion in cash (think acquisitions) to the revival of the network-computer concept.

Mr. McNealy compared Hewlett-Packard Co. to a car dealer, whereas Sun, International Business Machines Corp. and the combination of Microsoft and Intel Corp. are auto makers. (The latter two are "General" and "Motors," he said, reusing an old line that's been told with more venom.)

"At some point a car company that buys all the pieces is a car dealer," he said of Hewlett-Packard, arguing that H-P has "hollowed out" its research-and-development efforts. Not that that rules out some kind of alliance, he noted, saying that "I went to Carly [Fiorina] a long time ago and said we should be partners and not competitors. IBM Global Services is everybody's enemy, and it makes a lot more sense to partner. She didn't want to partner." (No matter, he indicated: "I'll call Mark" Hurd, Ms. Fiorina's replacement in the top job.) Later, he said that "it's mankind vs. Global Services."

The famous "hairball" remark even made an encore, with Mr. McNealy saying of the slow adoption of so-called thin-client network PCs that "it'll take as long to unravel the hairball as it did to ravel it." But he then added that by that he meant "the PC-industry hairball," not specifically Microsoft.

He admitted he misses the days of the Internet bubble: "People used to come in with green-spiked hair and body piercings and say 'Where's my server?' and throw money at us." Now, he says, customers are smarter and Sun has to work harder. And what if the bubble had continued for a time? Mr. McNealy looked up at the ballroom's collection of banners with trademark "Wall Street Journal" dot-drawings, spotted his own, and cracked that "I would have been right up here in front instead of in back." (So where would he like his to be? He pointed up above the stage with his usual slightly off-kilter grin: "Right there. Like Mao.")

Mr. McNealy compared Sun's agreement with Microsoft to a pair of boxers who shake hands by tapping gloves and "promise not to bite each other's ears off." But he got in at least a nip, telling the audience that while Sun does run Windows to ensure interoperability, employees who aren't in engineering aren't allowed "to connect Windows to our network for security and viruses reasons. … For another $2.4 billion maybe I won't say that."

Bill Gates's Backup Plan

Should this tech thing not work out, Bill Gates might have a future in the movie business.
[Bill Gates]

The Microsoft Corp. chairman's appearances in parody videos have long been a staple of Comdex and other digerati gatherings, showing a more-playful, self-deprecating side of the Redmond, Wash., tech titan and its leader. Mr. Gates's latest video incarnation, shown at the D: conference Monday, cast him in a send-up of "Napoleon Dynamite," with Mr. Gates tagging along with the movie's vertically haired title character (played by Jon Heder) and playing straight man to his rambling questions about Microsoft technology (no teleporting either of mice or men), listening patiently to Napoleon's Dungeons & Dragons-style ideas for Microsoft Bob, and weathering Napoleon's scorn that the powers that come along with Mr. Gates's knighthood are decidedly limited. (No, Mr. Gates does not lead centaur armies, though Napoleon does warn a co-worker that "he's a flipping knight -- he can like joust and everything.")

After his star turn onscreen, Mr. Gates took the stage for a discussion of Microsoft and its many businesses with Wall Street Journal columnist and conference cohost Walter S. Mossberg, from security to the new Xbox 360.

Asked about computer security, Mr. Gates said Microsoft's recent focus on improving Windows security had set back Longhorn, the next major release of Windows, by about a year (it's expected by the end of 2006), but added that "I feel great about the priorities we set." He noted that many of today's attacks succeed not for technical reasons, but through social engineering: Users are tricked into downloading code that can damage their computer or breach its security. That's something Microsoft is addressing by establishing a reputation network in which feedback from users gives downloadable applications a reputation rating, as well as other safeguards aimed at easing the flood of spam and exposing "phishing" sites.

But Mr. Gates seemed to startle some audience members with the observation that "during the last year, if you had up-to-date Windows, you would have been safe if you didn't have" antivirus software also running. And he endured a hostile question from a member of the audience who identified himself as being from ZoneLabs, a maker of security software, who blamed Microsoft for a litany of security problems and therefore decried Microsoft's forthcoming move to charge for a security suite, Windows OneCare, as "like something out of 'The Godfather.' "

Mr. Gates was unruffled by that and by the suggestion that Microsoft should partner with security-software makers, replying that "we're partnering with GeCAD, which is a company we bought." (Microsoft acquired Romanian antivirus company GeCAD Software Srl in June 2003.)

Mr. Gates also showed off some of the capabilities of the Xbox 360, Microsoft's next-generation videogame machine and a potential living-room hub, given its ability to display content from PCs on the same wireless network. Asked how that wasn't a direct competitor to Hewlett-Packard, Dell and other PC makers working with Microsoft to make Media Center PCs, Mr. Gates offered a not-terribly-convincing scenario in which different TVs in a house would interact with different devices – many hubs, if you will. He appeared most animated discussing Microsoft's continuing efforts on Tablet PCs, swearing that "we're going to make Tablet the most mainstream thing" that's ever happened. While the Tablet PC's reception has been underwhelming so far, Mr. Gates was serenely confident that it will catch on as graphic user interfaces did, quickly going from a fringe feature to a mainstream way of working.

Given that the D: conference is heavily seeded with computer-industry veterans, it was no surprise that the shadow of the past seemed to hang over many of Mr. Gates's remarks. He said desktop search will be integrated with Longhorn, then made reference to comments by his old rival, Apple Computer Inc. Chief Executive Officer Steve Jobs, from the same stage Sunday night: "Steve made a pitch for [operating-system] integration" of desktop search, he noted. "I was glad to see someone independent make that pitch. It's a good pitch." (He did take a shot at Mr. Jobs, however, when talk turned to relationships with hardware manufacturers: "Apple had a licensing strategy and they bankrupted everybody who took advantage of it.")

Asked about current high-flyer Google Inc., he recalled that Microsoft had a 10-year run of soaring stock prices and success, observing perhaps a touch wistfully that "it's kind of nice in a way, but it's kind of confusing as well." And he expressed patience about working with cellphone-service providers, despite their standing between Microsoft and the ultimate users of its software and sometimes tinkering with Microsoft's software for their own business reasons.

"We're a very patient company -- we don't need overnight successes," he said, then followed that up with a simple expression of faith in software's ability to smooth out any rough spots not only for consumers, but for business relationships as well: "The more magic it gets, the more control over that they'll grant."

'True Nerds' Take the Prize

The College Bowl lives: The old game-show format has been revived for the D: conference, pitting today's tech giants against each other when it comes to knowledge of the computer revolution. (Attendees could buy raffle tickets and drop them in the bucket of the competitor they thought would win, with drawings for prizes and the money supporting the Computer History Museum in Mountain View, Calif.)

Team #1, billed as the "True Nerds": Rob Glaser (RealNetworks Inc. founder and CEO), Stewart Alsop (venture partner, New Enterprise Associates, and former InfoWorld editor in chief), Mitch Kapor (president, Open Source Applications Foundation) and Mary Meeker (Morgan Stanley Internet analyst).

Team #2: Bill Gates (Microsoft Corp. chairman and chief software architect), Eric Schmidt (Google Inc. CEO and former Novell Inc. CEO), Mitchell Kertzman (venture partner, Hummer Winblad), and Esther Dyson (longtime tech thinker, now CNET editor at large). Team #2 adopted the moniker "Same Team," a dig at the rivalry between Microsoft and Google, and dug out t-shirts – but only Ms. Dyson wore hers.

Last year's champion, Mr. Kapor, quickly showed how he earned that title, nailing questions about the derivation of "Wiki," the origins of Electronic Arts Inc. and Gary Kildall. Both Mr. Gates and Mr. Kapor whiffed on how much RAM was standard on the first IBM PC motherboard – Mr. Gates said 32K, Mr. Kapor 64K. (It was 16K.) Mr. Gates almost instantly identified the first few words of his 1976 letter to computer hobbyists, famous for his observation that "most of you steal your software," while Mr. Glaser got the year the first version of Windows was released – though Mr. Gates mildly disputed that it was 1986, not 1985. Perhaps the best-received moment was when Wall Street Journal columnist and conference co-host Kara Swisher caught Mr. Gates and Mr. Schmidt chatting about the invention of integrated circuit after the True Nerds whiffed on the question: "Are you collaborating again?"

The contest was True Nerds in a walk, 285-100, with Mr. Kapor emerging as champion once again. But the final round, with him and Mr. Gates answering as many tech trivia questions as they could in two minutes, was most notable for the fact that neither man was particularly good at the mechanics of game shows. Mr. Kapor (who did have a big lead), passed on questions he didn't know early but then got distracted late, while Mr. Gates tried to parse questions and worried away at them when his only chance at winning was to pass and answer others. Perhaps both men are more used to solving problems then watching game shows.

Jobs Promises Podcast Support in iTunes

The conference got underway Sunday night with Apple's Jobs giving a sneak preview of a forthcoming version of iTunes, the software for buying and managing digital-music files, that could boost the popularity of podcasting.

Podcasting, an inexpensive, do-it-yourself style of broadcasting, has become increasingly mainstream: Mr. Jobs cited podcasts put together by everyone from enthusiastic amateurs to major media players such as Clear Channel Communications, Viacom's Infinity Broadcasting and NPR. But until now, he noted, downloading and subscribing to podcasts has required users to download third-party applications to run atop iTunes.
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That will go away in iTunes 4.9, which Mr. Jobs demonstrated for conference attendees and said would be available within the next 60 days. ITunes 4.9 will integrate free podcasts as a menu item, allowing users to listen to podcasts and subscribe to them, with new podcasts they subscribe to downloaded to their iPods when the devices are synched to an iTunes-enabled computer.

"I think this will send it into orbit," Mr. Jobs said, adding that he sees podcasts evolving into an advertising-supported medium similar to radio. In what was either a bit of self-deprecating theater or an object lesson in the perils of demos, Mr. Jobs then played the beginning of a podcast by former MTV personality Adam Curry that began with Mr. Curry lamenting that he'd restarted three times because his Mac had been acting up.

Addressing a range of other Apple-related issues in a give-and-take with Wall Street Journal columnists and conference hosts Walter S. Mossberg and Kara Swisher, Mr. Jobs expressed doubt about the prospect of cellphone-service providers making substantial inroads into Apple's dominant market share of digital-music players. (See related Portals column.) Mr. Jobs said downloading music from cellphone-service providers would be "a lousy buying experience" likely to be two or three times as expensive as Apple's 99-cent downloads, adding that "it's hard to see their customers as that stupid."

Mr. Jobs also cast doubt on Yahoo Inc.'s announcement of a $60-per-year music subscription plan, saying that price point was "substantially" below Yahoo's costs and would be raised. Mr. Jobs then claimed Apple employees had a betting pool on when Yahoo would raise the $5-a-month rate, with Mr. Jobs putting his money on five months.

Mr. Jobs proclaimed himself a solid believer in the "halo effect" of iPod sales fueling Mac sales, pointing to strong growth in recent quarters. Asked when Apple would reach a 10% market share – up from the low single digits -- he said he didn't know. But he added that "it's possible … if people learn about our products, many of them choose them."

On the subject of viruses and security holes in the Mac operating system, Mr. Jobs refused to crow about Apple's lack of incidents in comparison with Microsoft Corp.'s Windows operating system, noting that since all PC makers face the security challenge, machines shouldn't be marketed that way.

"One thing you never want to do in dealing with security and viruses is be cavalier," he said.

Mr. Jobs was mindful of the presence in the audience of his longtime rival, Microsoft's Mr. Gates. At one point, he polled the audience to see how many had iPods. Seeing quite a bit of upraised hands, he peered into the crowd and asked, "Bill, do you have your hand up?"

Write to Jason Fry at jason.fry@wsj.com

Corrections & Amplifications:

An earlier version of this article incorrectly listed the Web address for the Power Line blog. The correct URL is www.powerlineblog.com.