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To: Jim Willie CB who wrote (48751)	3/17/2002 1:25:04 PM
From: Cactus Jack	Read Replies (5) \| Respond to of 65232

JW, <I hate the nutty aura behind the gold bug kooks (even more, I love my choice of words in "aura")> Good one. jpgill

To: Jim Willie CB who wrote (48751)	3/17/2002 2:21:22 PM
From: stockman_scott	Respond to of 65232

Musings on 'The Security Presumption.' -From The Harrow Technology Report / March 18, 2002 We "know" that the information we transmit via Email is not secure. Unless you use special software such as PGP to encrypt a message's contents, it's possible (if not straightforward) for anyone on your LAN, or at your ISP, or at any of the servers that your message's packets traverse on the way to their destination, or at the destination ISP, or on your recipient's LAN, to read some if not all of your message. We all "know" this. And it probably doesn't matter much if you're sending a note to Aunt Millie. In fact, most of us never give this a second thought. Yet as Email becomes evermore a part of how we conduct our personal and business affairs, this presumption of security in a known insecure environment can lead to problems. And not just the obvious ones regarding things financial. For one example, as an increasing number of physicians have begun using Email to answer patient questions, and perhaps to prescribe medication, an intercepted Email message could illuminate things you probably didn't want to be public knowledge. And a modified Email message could be downright dangerous. Most of us have grown up in a written communications environment, the "mail" or "post," were the presumption of security carried the force of law. In the U.S. and in many other countries, the sanctity of first class mail is protected by laws that carry stringent penalties for anyone tampering with a letter; which in a manner of speaking "encrypts" the contents of the envelop, even though it isn't normally practical to actually encrypt the words. But with Email, Instant Messaging, and other forms of electronic messages, their contents don't (currently) enjoy similar legal protection. This becomes even more of a potential problem when any aspect of an Internet connection "goes wireless," because at that point an interloper no longer needs physical access to your or your ISP's physical wires -- they can just pluck your messages out of thin air. For example, the March 11 eWeek (http://www.eweek.com/article/0,3658,s=712&a=23806,00.asp) describes how someone can pick up a few parts at Radio Shack, and some free software from the Internet, and capture messages thumbed into many cellular phones or into the increasingly popular "BlackBerry Internet Edition," a wireless Email device from Research In Motion (RIM) that uses the wireless Mobitex network.) We might expect that once such an "opening" was discovered, the vendor would rush to close the gap. Yet the security researcher who demonstrated this security hole, Joe Grand, explains why that isn't going to happen: "The problem is, this isn't a bug. Its part of the spec that data is transmitted in the clear... The risk depends on who is using the network and when and what data they're sending." "Executives at RIM said they don't see the attack as a problem because they have never touted the Internet Edition devices as being secure." Indeed, Research In Motion CEO Jim Balsillie points out that, "Internet traffic isn't supposed to be secure." The problem, in my opinion, is that it should be. When the Internet was born, non-trivial encryption was beyond the ability of typical hardware. But thanks to enhanced end-to-end encryption and authentication schemes, and the results of Moore's Law on processing power, we can now easily encrypt our messages with the computational horsepower available to any of us; our PCs can encrypt and decrypt without missing a beat. I'm not a security expert, and so I wouldn't presume to suggest the best ways for protecting our Internet-borne missives. But I do strongly believe that the time, and the technology, and our society's growing use of electronic messaging, have all have reached a point where we can and should "change the rules" to make our casual although incorrect presumption of security, real. It could only make the Internet a better, and safer, and more empowering place for individuals and businesses and commerce.

To: Jim Willie CB who wrote (48751)	3/17/2002 10:26:14 PM
From: Wharf Rat	Respond to of 65232

If you sell coins to a dealer or silver to ?, I'm pretty sure you are supposed to pay cap. gains on it. Howsomever, a few coins here and there would leave it all up to your conscience. A major collection would probably be reported, unless you sold it privately. If we hit ruff times and you use the coins as coins, no tax.Besides, how would anybody know? Interesting stuff. I bought my first car in college using coin money. My bro and I got parking meter money, pulled out the good dates and sold them. Later on, starting pulling out all the silver coins. Rat

To: Jim Willie CB who wrote (48751)	3/17/2002 10:32:01 PM
From: stockman_scott	Respond to of 65232

Oil Shares Return to Favor as OPEC Drives for Higher Prices Bloomberg Energy (London), Monday, March 18 By Thomas Tugendhat Philip Lawlor at Royal London Asset Management bought shares of oil drillers Schlumberger Ltd. and Halliburton Co. Renee Carret of Carret & Co. likes Knightsbridge Tankers Ltd. and Frontline Ltd., two oil transport companies. Oil shares are rising as OPEC on Friday agreed to maintain production limits through June. The Bloomberg Europe Energy Index is up 14 percent this year, while an index of 500 European stocks is little changed. Four of the five top-ranked oil analysts have boosted forecasts for crude prices, citing OPEC's discipline. ``OPEC compliance over the past six months means the supply has been (managed) much better than people expected,'' said Lawlor, who helps manage $41 billion. ``Ten days ago, we were thinking of trimming positions, but the shares don't look high,'' assuming oil is $2 to $4 higher than the price of $21.89 a barrel on March 1. The Organization of Petroleum Exporting Countries said oil prices would have to rise by $5 a barrel, or more than 20 percent, before members boosted production. The world economy is recovering and can withstand a higher oil price, ministers said. Deutsche Bank AG, UBS Warburg AG, Merrill Lynch & Co. and Credit Suisse First Boston have increased their estimates to about $20 a barrel for Brent crude this year. In the past 15 months, OPEC has cut supplies four times, removing 5 million barrels a day from the market. That's enough to power South and Central America. `In Control' OPEC President Rilwanu Lukman said oil must exceed $28 a barrel for their benchmark index before they increase supply. That marker last stood at $22.79. ``OPEC is in control,'' said Daniel J. Rice III, senior vice president and portfolio manager at State Street Research in Boston, who manages the $138 million State Street Research Global Resources Fund. ``This is the most shut-in production that OPEC has ever had. It indicates a compliance from OPEC that we haven't seen before.'' State Street owns about 10 percent of the shares of Calgary- based Baytex Energy Ltd., Rice said. He also likes Calgary-based Hurricane Hydrocarbons Ltd., which explores mostly in Kazakhstan. Higher oil prices will mean more cash for the biggest oil companies, such as Exxon Mobil Corp., Royal Dutch/Shell Group and BP Plc, and that will mean more to spend on drilling. Kerr-McGee Corp., an Oklahoma City-based oil and gas explorer, said Friday it will boost spending this year by $120 million, or 13 percent. ``If cash flows are going to grow, spending will grow,'' said Lawlor. ``And I see no reason why, with cash flows expanding, service companies won't benefit.'' Shares of Schlumberger, the largest oilfield-services company, have gained 9.7 percent this year, while those of Halliburton, the second-largest, have jumped 27 percent. The Standard & Poor's 500 Index has risen only 1.6 percent. Refiners Hurt While rising oil prices have helped the biggest oil companies -- BP shares are up 14 percent this year -- the higher crude price will hurt their refining divisions, which make gasoline and other fuels from crude oil, said Markus Ilg, who helps oversee about 40 billion euros at WestLB Asset Management. ``Because they rely on selling refined products as well as crude oil, the higher oil price will only add 5 percent to the oil majors' earnings,'' Ilg said. A recovery in demand may also benefit the oil-tanker companies, which ferry millions of barrels a day worldwide. Tanker rates are at a two-year low equal to 85 cents a barrel for shipments from Saudi Arabia, only a fourth the level in November 2000, when oil neared $34 a barrel. Shares of Hamilton, Bermuda-based Knightsbridge have risen 8.5 percent this year in expectation of higher freight rates, while Norway's Frontline have gained 6.5 percent. ``The tankers are one of the first areas to pick up from interest in oil,'' said Carret, who helps manage $2 billion and owns shares in both shippers. Iraq It isn't just OPEC that accounts for the biggest monthly rally in oil prices since May. The threat of war with Iraq, which pumps 3 percent of the world's supply, accounts for a premium of $2 on each barrel of oil, said the Saudi oil minister, Ali al-Naimi. The U.S. economy is also recovering from the first recession in a decade. Industrial production increased in February for a second month, and consumer confidence rose in March as the U.S. economic rebound gathered pace, Federal Reserve figures showed Friday. Now that OPEC has reinstated its price range and New York oil prices are seen averaging $23 to $24 a barrel, oil stocks should be up 30 percent to 40 percent, Rice said. ``The key question is: does it happen next week or does it take two or three years?'' he said.

To: Jim Willie CB who wrote (48751)	3/17/2002 11:03:54 PM
From: stockman_scott	Respond to of 65232

How the investment bank CIBC keeps money from the taxman Offshore accounting Derek DeCloet Financial Post When John Hunkin takes the stage in Halifax next week for the Canadian Imperial Bank of Commerce's annual meeting, he'll describe an eventful year marked by the same difficulties other banks have faced. And yet its results were respectable. CIBC earned $1.69-billion -- an 18% decline from the year before but still a better showing than Bank of Montreal. Its results were as good as they were because it did an unusually good job of keeping its money out of the taxman's hands. The bank reported paying just $92-million in income taxes -- an effective tax rate of just 5%. No other major Canadian bank paid less than 27% of its profit in income taxes, according to calculations in a report by National Bank Financial. In effect, CIBC saved hundreds of millions of dollars in tax in 2001 -- preventing a much larger decline in its earnings. How did it do it? Nearly three months after the release of its year-end results, even some of Bay Street's most-respected bank analysts say they don't fully understand it. At least one institutional investor has refused to buy CIBC shares until it provides a better explanation. One official at a rival bank calls it "pretty amazing." No one has suggested the bank is doing anything wrong. But after the collapse of Enron Corp., investors are highly sensitive to accounting matters -- leading some to ask if CIBC is being aggressive in its tax accounting. The bank's explanation of its unusually low tax rate is complex. But the primary factor is the geographic distribution of its profit -- that is, where it makes its money. During the 2001 fiscal year, CIBC earned very little money in North America, where corporate income taxes are relatively high. Its pre-tax profits in Canada were almost completely wiped out by its losses in the United States, so it earned just $240-million in North America. So where did the rest of its $1.69-billion in profit come from? Most of it -- $1.2-billion -- came from its West Indies operations, according to a note in the bank's financial statements. CIBC maintains subsidiaries in the Bahamas, Barbados and the Cayman Islands, among other offshore locales. Corporate taxes in these places are low. By making almost three-quarters of its profit offshore, it was able to keep its overall tax rate low. That much is clear. What's less easy to figure out is how CIBC reaped so much money from its West Indies subsidiaries. Part of it can be explained by the bank's investment in Global Crossing Ltd., the Bermuda-based builder of telecommunications networks. Global Crossing filed for bankruptcy protection last month, but CIBC has already used hedging strategies to secure a multi-billion-dollar windfall from its investment in the company. In the past three years, CIBC has booked more than $2-billion in Global Crossing revenue. "The holding company [for that investment] is in the West Indies, so all the revenue flows through there," said Stephen Forbes, director of investor and financial communications for the bank. But Global Crossing doesn't account for all of the bank's apparent prosperity in the region. In fact, CIBC has reported almost $4.5-billion in revenue from its West Indies operations in the past three years. And some $2-billion of that is interest income (the gains from Global Crossing are non-interest income, Mr. Forbes said). CIBC has a retail and banking presence in Caribbean, but with 42 branches it is small. (By comparison, it has 1,170 branches in Canada.) It also has a wealth-management arm, a treasury group, and "some other small operations," Mr. Forbes said. Overall, the bank's West Indies division is not large; it accounts for just 2.3% of the bank's non-interest expenses. How can a bank earn so much money in low-tax countries with few staff and minimal expenses? That's the part that remains a mystery. The bank does not disclose anything more about the nature of its West Indies operations. One investor says he has asked the bank for details on why its tax rate is so low. "They provided us with an explanation that wasn't an explanation," said the investor, who spoke on condition on anonymity. "But it's all supposedly legal." Colin Litton, national director of KPMG LLP's banking and finance practice in Toronto, said scrutiny of Canadian banks is so tight that it's practically unthinkable any bank would risk the wrath of tax authorities in Canada by bending the rules. "These banks are under continuous audit from revenue authorities because, obviously, they're big taxpayers," Mr. Litton said. "You can rest assured that whatever figure is [reported], is what the figure is." Even so, the anonymous investor complains CIBC's disclosure is not good enough to make him comfortable. In any event, CIBC's low tax rate is probably unsustainable. With a better economy, its losses in the high-tax U.S. ought to shrink. Its Global Crossing position is nearly exhausted, meaning the bank's offshore revenue will decline in the future. Mr. Forbes described last year's low tax rate as "an aberration" and said CIBC expects to pay out 20% to 25% of its pre-tax profit in income taxes in fiscal 2002. Assume that the bank's projections are right and CIBC pays 22.5% of its profit in income taxes to various governments during this fiscal year. That means it will have to increase its pre-tax earnings by 18%, or more than $330-million, to show the same profit this year as last year. nationalpost.com

To: Jim Willie CB who wrote (48751)	3/18/2002 11:09:02 AM
From: stockman_scott	Respond to of 65232

Tech's Best Hope: Pockets of Prosperity By Alex Salkever BusinessWeek Online Monday March 18, 10:09 am Eastern Time Ask PeopleSoft Senior Vice-President Michael Gregoire about the technology industry's prospects in 2002, and he says it's looking like a year in the doldrums, with little real growth. ``There's still a lot of caution and scrutiny going into capital expenditures,'' says Gregoire, who heads the business software company's 3,300-person consulting unit. Ask Gregoire about his own company, however, and he says PeopleSoft (NasdaqNM:PSFT) will prosper this year. In fact, the company announced in early February that it expects operating margins to hit 18% in 2002, up from 15.4% in the fourth quarter of 2001 -- and 10.7% the year before. Even with sales growing nominally, PeopleSoft should post higher profits. So which Gregoire knows what he's talking about? Both. Corporate spending on many sectors of information technology will likely stagnate or decline in 2002. Hardware and communications equipment will probably take the brunt of that hit, while software and services will do O.K. Average it out, and the persistent cloud over tech may have a silver lining, as pockets of prosperity prove sufficient to offset the parts of the industry that will remain in a slump. YESTERDAY'S HOTSHOTS. ``It's not, 'Go long everything in technology.' There are pockets of demand, but it's not software across the board. It's not semiconductors across the board. It has become a company-specific call within each given sector,'' says David Readerman, growth strategist at San Francisco investment bank Thomas Weisel Partners. At the same time, the slow-forming recovery will likely redefine the tech sector. One-time go-go products such as databases, desktop PCs, and productivity software will shift into more subdued growth patterns, while newer types of software and IT services may grow at a far faster clip. That means niches within niches are now developing. Many analysts are wary of storage-hardware maker EMC (NYSE:EMC - news) but love storage-software plays such as Veritas (NasdaqNM:VRTS). The upshot? Oracle's Larry Ellison and Microsoft's Bill Gates might end up looking more like the heads of General Motors and General Mills than CEOs of the swiftest players in the game. The tech slowdown, now approaching the end of its second year, ``is definitely a sign of the maturing of the industry,'' says John Rutledge, manager of Evergreen Technology Fund. ``This year, the entire industry is scrapping for only $19 billion in additional revenues'' Without a doubt, the rest of 2002 will be a period of slow growth. A Mar. 11 Merrill Lynch survey of 100 chief information officers at major companies found them shifting their expectations of a tech-spending recovery out of 2002 and into early 2003. According to Peter Kastner, chief research officer at tech consultancy Aberdeen Group, total tech-sector revenues -- including hardware, software, and IT services -- will bump up from $446.1 billion in 2001 to $465.3 billion in 2002, an increase of 4.3%. That excludes heavy-duty telecom equipment such as switches and backbone routers, which likely would have dragged down the figure. For sure, it's an improvement vs. the real decline in tech spending during 2001. But such an increase would be tiny compared with the great mid-double-digit sales leaps of the late 1990s and 2000. ``This year, the entire industry is scrapping for only $19 billion in additional revenues,'' says Kastner. LIFELESS SECTORS. In some corners, those scraps are already drawing blood. Two sectors that have provided a huge stimulus for the tech sector during the past two decades -- PCs and cell-phone handsets -- remain dead in the water. According to a report released on Mar. 12 by Dataquest, global sales of handsets fell in 2001 by 3.2% -- their first-ever decline. Likewise, unit PC shipments fell by 5.1% in 2001, according to IDC. Early indications have emerged, however, that PC sales growth might get back into the black in 2002, driven by laptops. And handsets should also return to single-digit growth as roll-outs of new wireless-data networks spark some sales. But the new reality feels like a screeching halt compared to the swift growth of past years, according to Evergreen's Rutledge. By his tally, handset sales exploded at an average annual clip of about 50% in the 1990s. And unit sales of PCs swelled 18% annually for the past two decades. Now, the markets for both of those products appear to be largely saturated. This is bad news not only for the companies that have ridden those devices to prosperity but also for lots of ``downstream'' component makers that have thrived until now. SEARCHING FOR GROWTH. Everyone from chip manufacturers such as Texas Instruments (TXN) and Analog Devices (ADI) to chipmaking-equipment suppliers such as Applied Materials (AMAT) might feel the pain until innovations in hardware or software create a need for businesses to replace their stock of PCs and individuals to seek new phones. For now, though, there's no growth engine to take their place. ``These products consume a lot of semiconductor components and are sold in the hundreds of millions,'' notes Rutledge. ``We don't see any electronic product right now that will have the scale of either of those.'' Microsoft's push to get customers to upgrade to Windows XP may be running out of steam With the economy still walking a tightrope, that's also true for many types of basic software, such as Microsoft Office and Oracle database software. These programs have already reached a degree of sophistication where newer versions offer only marginal improvements, so many businesses hold off on upgrades. On Mar. 13, Oracle (ORCL) announced that its profits fell by 13% and that gross sales fell by 20% for the third fiscal quarter of 2002 as it struggled to sign up new customers. And influential Goldman Sachs analyst Rick Sherlund downgraded Microsoft (MSFT), after saying that he believes the software king's push to get customers to upgrade to Windows XP has run out of steam. Those problems are minor compared with the challenges facing the big telecoms. While the Securities & Exchange Commission is investigating possible accounting irregularities at two of the biggest long-distance players, Qwest (Q) and WorldCom (WCOM), spending on telecom equipment continues to plunge. That comes on the heels of a spate of high-profile bankruptcy filings by telecom carriers such as Global Crossing and 360Networks -- not to mention disappointing results at Williams Communication Group (WCG) and Level Three (LVLT). Lucent (LU), Nortel (NT), and Cisco (CSCO), among other suppliers to the big telecom market, remain far from optimistic. ``It's an industry in nuclear winter,'' says Aberdeen Group's Kastner. QUICK RETURN. Beyond those trouble spots, however, the tech sector isn't looking too bad. According to Aberdeen's projections, revenues in the IT-services business will grow from $173.9 billion in 2001 to $183.7 billion in 2002, a 5.6% clip. And software sales will climb from $93.7 billion to $100 billion, a 6.7% rise. That compares to a mere 1.7% increase projected for hardware, from $178.4 billion to $181.4 billion. Analysts say companies are planning to continue spending on advanced software that can optimize their operations. More often than not, with that software comes IT services -- systems integration -- from companies such as IBM (IBM) and Accenture (ACN). Big systems integrators like IBM and EDS enjoy growing backlogs Customers' continued willingness to spend is due, in part, to the fact that software used in enterprise resource management [ERP] and customer relationship management [CRM] quickly pays for itself. ``We have seen that the ERP space is one of those areas where there is a proven return on investment,'' says Thomas Weisel's Readerman, who favors SAP as a good pick in the sector. According to the Merrill Lynch CIO poll, ERP and CRM currently rank No. 1 and No. 2, respectively, among the software products that companies are buying during 2002. This popularity is a big plus for sector leaders such as PeopleSoft, SAP (SAP), and Siebel Systems (SEBL). The more of these ERP and CRM systems that need to be installed, moreover, the happier systems integrators are. According to Aberdeen's Kastner, big players such as IBM (IBM) and Electronic Data Systems (EDS) enjoy growing backlogs of work in these areas. Add to that the lengthening life cycles of PCs, servers, and most other types of hardware, and the decision to dedicate more money to software becomes a no-brainer. INEVITABLE RECOVERY. Other software sectors that caused barely a blip in past IT recoveries will likely play a much bigger role in the coming rebound. Business-analytics software, which allows companies to gather all the information about themselves on their computer systems and analyze it to optimize efficiency, is set to soar, says Vincent Muscolino, a managing director at Cambridge [Mass.] investment-counseling firm David L. Babson & Co. As just-in-time manufacturing spreads, this type of analytical software is becoming more important. ``Dell keeps two hours of inventory. Therefore, if Dell's supplier's supplier has a plant fire, you want to know about that, because this could back up the assembly line tomorrow,'' explains Kastner. A slight recovery in tech has also become inevitable due to the huge cuts in inventories and overhead that so many producers have made. ``Companies such as Sun and EMC (EMC) have lowered their break-even points considerably,'' says Muscolino. He figures that EMC used to need to pull in $8.4 billion in revenue a year to break even. Now, it needs only $6 billion, he figures. Further, Muscolino points out that even though the business of legacy software makers has slowed, they still enjoy stellar profits. ``Oracle has managed to maintain 30% margins in an awful economy,'' he notes. More efficient production technology should boost chipmakers' bottom lines And coming off a horrific bottom, the semiconductor industry has bounced back. January orders were up 49% vs. the same month a year ago, according to figures from the Commerce Dept. Chipmakers are also about to reap the full benefit of more efficient production technology that should boost their bottom lines significantly. Stronger chip orders are particularly good news, since they usually portend a recovery in the rest of the hardware sector. SET UP FOR A FALL? To put it in perspective, this year's uptick in the chip business will likely return many companies only to the revenue levels they enjoyed in 1997 and 1998. The industry may not see 2000 production levels for some time. But chipmaking technology keeps improving -- ``manufacturers continue to pack more circuits on a chip,'' says Evergreen's Rutledge -- paving the way for a rebound when consumer and business demand returns. None of this may launch a significant tech rally on Wall Street. If anything, many analysts fear that the market has priced in a recovery-and-a-half -- and set tech stocks up for disappointment. A lot also depends on the global economy: If Japan's funk drags the rest of Asia down with it, all bets on a tech recovery could be off. ``There is value in some of the technology names, but there is no reason why this sector will realize this value until the business community starts to spend on technology in a big way,'' says Milton Ezrati, senior economist at Lord Abbett & Co. For now, a big boost in overall tech spending looks unlikely. And when it does arrive, don't assume that past winners will be leading the pack again. __________________ Go to www.businessweek.com to see all of our latest stories.

To: Jim Willie CB who wrote (48751)	3/18/2002 11:22:44 AM
From: stockman_scott	Respond to of 65232

Tech looks to biotech for growth High-tech firms say medical research is a healthy market By Ted Griffith, CBS.MarketWatch.com Last Update: 5:38 AM ET March 17, 2002 BOSTON (CBS.MW) -- Faced with a painful slowdown in nearly every other market, high-tech firms are looking to the world of biomedical research to rekindle growth. Increasingly, the optimistic techies say, server computers and data storage systems are supplanting test tubes and lab rats as the essential tools for the discovery of new medications. "Life sciences is going to be the next growth market for storage," said Christine Westermann, a spokeswoman for computer data storage giant EMC Corp. "This is an important market for EMC." Forecasters at IDC, a high-tech market research firm, believe biomedical companies could be spending $38 billion a year on technology gear by 2006. EMC (EMC: news, chart, profile) and other major high-tech companies, including Compaq Computer (CPQ: news, chart, profile), IBM (IBM: news, chart, profile), Oracle (ORCL: news, chart, profile) and Sun Microsystems (SUNW: news, chart, profile), have established "life sciences" units to focus on selling software and hardware that biotech and pharmaceutical companies can use in their quests to discover new treatments for disease. The mapping of the human genome, humankind's genetic blueprint, has created so many potential leads for drug companies that they must turn to computer technology to analyze and store all the new information, tech firms say. Biomedical research dollars still account for a relatively small part of overall technology spending, but at least it's a growing niche. That's what has grabbed the attention of big high-tech companies, which saw many of their other customers vaporized in the telecom and dot-com meltdowns. "This is one of the strong bright spots for information technology when other areas are contracting or not growing at their previous pace," said Michael Swenson, a senior research analyst at IDC. "There is really no end in sight." Wary of hype But with the bursting of the dot-com bubble still fresh in investors' minds, it seems reasonable to wonder whether technology is being overhyped. "This market is going to grow, the question is: How much?" said Oliver Fetzer, a vice president with Boston Consulting Group. "People are saying the sky is the limit, and that's where you have to be cautious." Fetzer is in the midst of an extensive study of "bioinformatics," the use of computers in the study of biology. Fetzer said he's found that, in some respects, the market is "very fragmented," with a number of small software companies that have yet to clearly show that their products can make the business of discovering new medications more efficient. Even Compaq CEO Michael Capellas, who gave a keynote address at a "Bio-IT" conference this past week in Boston, warned about the potential for "hype." "People have spent a lot of money, and now we need to see some demonstrable results," Capellas said. "We have to look at this pragmatically." Still, he said he's convinced demand for computing power in the biomedical market will balloon because there is so much new data generated through the genetic research being done by companies, academic institutions and government agencies. Boosting productivity Capellas also said information technology companies can help pharmaceutical and biotech companies solve their biggest problem: poor productivity. Only a small fraction of the promising compounds identified in the lab turn out to be suitable for commercial use. Often, a company spends tens of millions of dollars developing an experimental medication only to find that the drug is unsuitable for patients because of unanticipated side effects. Capellas said computer modeling may allow companies to determine whether a drug is worth developing before they begin the costly and time-consuming patient testing process. "Through simulation earlier on, you can improve the success rate," the CEO said. "The whole idea is to hit a 95 percent success rate." Steven Gold, director of bioinformatics at New Haven, Conn.-based biotech firm Curagen (CRGN: news, chart, profile), said he agrees that information technology has become vital to the work of biotech and pharmaceutical companies. Gold said the mapping of the human genome would have been impossible had it not been for computer technology. Celera Genomics (CRA: news, chart, profile) used high-speed sequencing equipment to achieve its goal of mapping the human genome in less than three years. In a testament to the importance of technology to his company, Gold said more than 15 percent of Curagen's 500 employees are in the high-tech field. But Gold stops short of saying that the biomedical market will definitely be the panacea for slowing growth that some high-tech companies hope. "It's extremely difficult to tell what will happen," Gold said. "I just don't know whether their expectations are going to be met." _____________________ Ted Griffith is a reporter for CBS.MarketWatch.com