There's an App for That?!?!

The growing proliferation of robots (corresponding to the ubiquity of technology and/or drop(s) in prices) continues.

The latest example: as mentioned earlier, a lab at MIT has developed a application for the iPhone that allows a user to connect to a relatively cheap ($5,000 or so) quad-rotor helicopter available from Ascending Technologies GmbH.

What is key to the application is that the robot is finding 'its own way.' As demonstrated in the video, the user simply identifies an end point, and the mini-UAV (Unmanned Aerial Vehicle) plots its path to the target. (Presumably avoiding obstacles, like the vertical column seen in the video, in the process.)

The UAV is equipped with a camera, making the military applications obvious: seeing around corners, looking at the top of roofs for snipers, examining possible IEDs. But the availability of the components (and lost cost thereof) will mean that 'bad guys' will also have the technology. In addition, one could imagine civilian users who might also use the device for less-than-admirable ends.

In her talk on Tuesday, Dr. Cummings alluded to the Federal Aviation Administration's concern about these micro UAVs. Indeed, the FAA has started to issue regulations and related certificates for such UAVs: Honeywell received one of the first certificates in 2005 to test an untethered UAV on the Laguna Indian Reservation (about 45 miles from Albuquerque); interestingly, the FAA, in issuing such a certificate, evaluates the airworthiness of the entire system, not just the drone. Among the FAA's current requirements, there must be a ground observer or an accompanying “chase” aircraft must maintain visual contact with the drone, to insure that there is no interference with other aircraft. In February 2007, the FAA published medical certification requirements for pilots who are 'operating' UAVs.

This field will clearly continue to grow, and the FAAs ability to safely manage US airspace will be an ongoing challenge. Introduction of such mini UAVs in a battlefield situation (over Afghanistan or Pakistan, for example) will require coordination between various service.

(As an aside, radio-controlled (RC) model aircraft are subject to other rules, and are not supposed to be flown more than 400 feet off the ground.)

Brocade and Backdating

After a quiet summer, the backdating scandal appears to be ready to re-emerge front and center in the business community; Brocade's former CEO Gregory Reyes was apparently found guilty of 10 counts of backdating and related securities infractions today. As the markets have slowed (perhaps signaling a finale to the private equity/debt bubble), the last vestiges of the previous bubble (the tech one that popped in 2000-01) are being litigated.

Apple's Steve Jobs remains the highest-profile CEO to be implicated in the backdating scandal, although no SEC charges have been brought against him.

07.07.07

The Live Earth concert -- which begins tomorrow (July 7th) in Sydney, Australia -- will undoubtedly attract young viewers and concert-goers with a lineup that includes Dave Matthews, Corrine Bailey Rae, and KT Tunstall, and for those of viewers of a certain age, The Police, Madonna, and Smashing Pumpkins.

The concert(s) (and there are 8 different venues) appear to be a logistical nightmare, but the promise of the world's youth (and those that think they are young) congregating around a 'smart' idea has proved to be like honey to corporations that need to be young and green themselves (e.g., Philips, GM, Pepsi). And of course, the biggest brand is 'Al Gore' who has turned climate change into his own cottage industry.

For a man who has supposedly "fallen out of love with politics", he still acts like someone who loves policy.

iPhone (TM) Update

Apple and Cisco (as earlier posted) have apparently agreed to settle their trademark dispute over the use of the "iPhone" name to describe (i) Cisco's phone and (ii) Apple's forthcoming cell phone. According to the WSJ,

Under their agreement, Cisco, of San Jose, Calif., and Apple, of Cupertino, Calif., are free to use the iPhone trademark on their respective products throughout the world.

It also has come to light that Cisco apparently failed to make use of the name "iPhone" during the six years following registration, and therefore the validity of any claim that they had against Apple was under suspiscion. A good reason to settle.

Apple and IP Rights

Two bits of news related to Apple this week.

First, on Monday, Apple announced the resolution of its ongoing battle with Apple Corps (the Beatles' record label) with regard to teh use of "Apple" in connection with music. Originally a trademark dispute, the two sides reached an agreement in 1991; however, with the expansion of Apple's business into music and music delivery (via iPod/iTunes), Apple Corps brought suit on an apparent breach of the 1991 settlement. The new settlement gives Apple rights to use "Apple" in connection with music, and licenses the name back to Apple Corps in certain areas. The guess here is that in addition the license rights, Apple Corps received a hefty check. Next step: getting the Beatles' music on iTunes. And then turning to resolution of the Cisco dispute over 'iPhone.'

Second, yesterday Steve Jobs released an open letter calling for a music industry-wide move away from Digitial Rights Management (DRM) software. Jobs states that when Apple went to license music from the major labels, it was required to create, update, and monitor use of the music and protect it via DRM; as the result, music sold through the iTunes store will only work on Apple products (iPods). (Apple argues that providing the 'keys' to permit DRM on third-party products will result, inevitably, in the disclosure of the keys to the public and therefore the 'unlocking' of the DRMs.) Moreover, as Jobs also points out, the labels' sell millions of CDs to the public without any DRM at all. (Apple, by the way, calculates that only 3% of the music currently loaded onto the world's iPods was purchase through the iTunes store; but that 3% still equals 2 billion songs.)

As the leader in portable music (and looking to extend that lead with the iPhone), Apple has the most to benefit from elimination of a DRM regime that seems flawed to begin with; and what is good for Apple, in this case, looks like it would be good for consumers as well.

Mr. Jobs and Stock Options, continued

Reuters is reporting that Apple's Steve Jobs has been 'questioned' by the SEC and the Justice Department in connection with the backdating of Apple's options during the 1998-2006 period. (See previous posts.)

Even if Apple's story holds up (which is that a few individuals, former CFO Fred Anderson and former General Counsel Nancy Heinen, and perhaps Wendy Howell, a lawyer who reported to Heinan) were responsible for all of the bad actions, it is still not surprising that the "Feds" want to talk to everyone who was involved.

Today's story also noted that:

Chris Steskal, the lead attorney in the Justice Department's investigation, left in January to join law firm Fenwick & West LLP as a partner, according to the firm's Web site.

The Fenwick & West site states that

Prior to joining Fenwick & West, Chris [Steskal] was an Assistant U.S. Attorney, working as part of the Securities Fraud Section and Stock Option Task Force of the U.S. Attorney’s Office in San Francisco.

In a coincidence, TPM's Muckraker site also reports that San Francisco U.S. Attorney Keven Ryan also recently left his post; there are rumors about a recent series of U.S. Attorneys who have left their posts in the past few months under cloudy circumstances. The renewal last fall of the USA Patriot Act apparently gave the Bush Administration wide(r) latitude to replace U.S. Attorneys.

Apple v. Cisco

Lost in the tumult over Apple's (very successful, apparently) launch of its new cellphone was the fact that Apple was sued the next day by Cisco for trademark infringement. Cisco, it seems, has been selling a VoIP phone of that name since the spring of last year. (Cisco, in turn, acquired the mark when it made an acquisition in 2000.)

A few thoughts: first, Apple and Cisco apparently had been negotiating through the weekend (with the announcement looming over the talks) over licensing rights to the name. Wonder what the difference in prices were at the end?

Second, the USPTO does recognize the same "mark" in different categories, so Apple may be betting on the ability to differentiate the two phones (so as not to confuse the public, which is essentially the test the USPTO applies). But at first blush, it seems that Apple has an uphill battle to prove that the cellphone and VoIP phone markets are so distinct that consumers won't be confused.

Third, it's interesting to note that Apple was also involved in a high-profile litigation with Apple Corps (the Beatles' label) over the use of the "Apple" in connection with music (iTunes, iPod, etc.)

Finally, it's rare to see two corporate giants litigate head-to-head. Enjoy the show.

Backdating, Steve Jobs, and the Presidential Race

So what does Corporate America's option backdating scandal have to do with the 2008 Presidential race? Well, more that you think, potentially.

The backdating scandal has been gathering momentum in business and legal circles since the middle of 2005, when academic research was published that showed that hundreds, if not thousands, of companies have almost surely manipulated option grants over the past few years. (This week BusinessWeek has a profile on one of the professors, Erik Lie.)

The Wall Street Journal has led coverage of the option scandal, beginning with a front page story entitled "The Perfect Payday," on March 18, 2006:

On a summer day in 2002, shares of Affiliated Computer Services Inc. sank to their lowest level in a year. Oddly, that was good news for Chief Executive Jeffrey Rich.

His annual grant of stock options was dated that day, entitling him to buy stock at that price for years. Had they been dated a week later, when the stock was 27% higher, they'd have been far less rewarding. It was the same through much of Mr. Rich's tenure: In a striking pattern, all six of his stock-option grants from 1995 to 2002 were dated just before a rise in the stock price, often at the bottom of a steep drop.

Just lucky? A Wall Street Journal analysis suggests the odds of this happening by chance are extraordinarily remote -- around one in 300 billion. The odds of winning the multistate Powerball lottery with a $1 ticket are one in 146 million.

Companies involved with backdating have forced many executives and/or directors to resign, including (according to the WSJ, sub. req.) Monster Worldwide, United Health, and Comverse Technologies.

Another company implicated in the scandal: Apple Computer. And after an investigation, the company announced just before the end of the year (in connection with a filing at the SEC), that although CEO Steve Jobs was "aware of or recommended" the dates used for backdating (which included, 6,428 grants of options at Apple on 42 different occasions, and in one instance, a grant made on October 19, 2001 directly to Jobs at "special board meeting" that did not actually take place), no company sanctions would be taken against Jobs.

In the press release on December 29, 2006 (in connection with the filings), a special committee said:

The special committee, its independent counsel and forensic accountants have performed an exhaustive investigation of Apple's stock option granting practices...The board of directors is confident that the Company has corrected the problems that led to the restatement, and it has complete confidence in Steve Jobs and the senior management team.

The Special Committee of Apple's board is comprised of two individuals: former Vice President Al Gore and financier Jerry York. (Gore joined the Apple Board in March of 2003.)

The WSJ's story the next day (Dec 30, 2006) said:

David Yermack, a finance professor at New York University who has studied options issues, said he was perplexed about directors' expressions of confidence in Mr. Jobs. "They have pretty much admitted that he was directly involved in a fraud," Mr. Yermack said, pointing to Apple's statement that Mr. Jobs "recommended" the selection of favorable grant dates. "If he had directly participated in altering depreciation schedules, or booking revenue that wasn't yet earned, would they have full confidence in him?"

Investigations are on-going, and nothing definitive has been determined. Apple amended earlier filings relating to the option grants, and took a charge of $84M for the period from 1998 to 2006.

Jobs, meanwhile, is one of the most recognized CEOs in America today. Widely credited as being both a technical and marketing genius, since returning to Apple, has he has helped make Apple both a stock market star among Fortune Magazine's "most admired" companies. On the day of the Special Committee's report, the company's stock moved up about 5%.


However, as one commentator noted in the Boston Globe this morning: "'If Steve Jobs were anything other than what he is, he'd already be gone,' said Rob Enderle, principal analyst at Enderle Group, a high-tech research firm. 'There was a crime committed . . . it looks like Steve Jobs was kind of the ringleader.'"

Gore is not currently a candidate for President, although rumors continue to circulate and he continues to have some support in polls (see earlier post.) In addition Gore apparently sent holiday cards to a number of political activists in New Hampshire, inspiring comment on the Blue Hampshire blog. There is certainly a plausible theory that Gore might "make himself available" next fall as a top-tier candidate who is well-known to the Democratic electorate, as an "alternative" to another well-known, potential -- but so-far undeclared -- candidate.

But SEC (and perhaps Justice Department) investigations -- which would likely be in full swing next fall -- may uncover more damaging information about who knew what, and when. And Apple's own filing stated that Jobs "was aware of or recommended" the backdating. Not unlike Martha Stewart, Jobs could be a trophy for an ambitious prosecutor.

Before all is said and done, we may be hearing a lot more about Al Gore's service on Apple's board. Politicians and SEC investigations are not a good combination for the politicians involved (Just ask former Senator and putative-Presidential candidate Bill Frist.) And political writers may be spending more time than they ever imagined poring over Apple's SEC documents, and the meaning of "backdating of stock options."




(One other "small world" note: Affiliated Computer Systems (mentioned in the original WSJ article) apparently hired an outside law firm last year to conduct a separate investigation into its option-granting practices. The firm was Bracewell & Giuliani LLP. And the "Giuliani" in the firm's name? Right, Rudy Guiliani.)

(Photo of iChat between Steve Jobs and Al Gore. Source: www.w-uh.com/posts/030623_Apple_WWDC.html)