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The Year In Technology

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The Year In Technology

PR News --December 22, 2004

By Cynthia L. Webb

Will 2004 be remembered as the year the technology sector grew up? There are plenty of reasons to think so.

From Silicon Valley darling Google coming out of its cocoon in the biggest IPO since the tech bust, to the mainstreaming of open-source software and the rise of satellite radio, the year was full of signs that technology companies are not just done licking their wounds -- they're expanding, investing and otherwise preparing to write the next chapter of the New Economy manifesto.

In the past year, broadband outpaced dial-up connections in the U.S. for the first time, hinting yet again that the long-promised digital convergence is just around the corner. Desktop search applications and the major commitment by Yahoo, Microsoft, and a host of start-ups to challenge Google in the search-engine space ensures a heady competitive race that will surely pay off in great new features for consumers and businesses. For hardware manufacturers like Apple, Dell and Hewlett-Packard, the focus these days seems to be less on personal computers and more on a host of tech gadgets that play music, movies, games, or take pictures, record audio and organize your day. And don't forget the ubiquity of WiFi...

Here's my Top 10 list of the technology developments that I think were most notable this year and are likely to remain a significant influence on the sector in 2005:

10. VoIP's Big Leap: Vonage, Skype and other companies offering Internet telephone services proved in 2004 that the Web is about to revolutionize the century-old telecommunications industry. The rise of Voice-over-Internet Protocol forced traditional carriers like AT&T to devise their own Voip offerings. Perhaps more importantly, Voip highlighted the need for greater investments in rolling out high-speed wiring to the nation's households and businesses, as the broadband pipe of the future will be expected to carry a heavy stream of digital communications. Retailers are latching onto Voip too. Just yesterday, Vonage announced that CompUSA will sell Vonage service at its stores and online. The Voip revolution has just begun.

9. Merger Mania: The technology sector went on an M&A binge in 2004, especially in the last three months. The merger-of-the-year award surely goes to Oracle's Larry Ellison, who finally managed to gobble up rival business software firm PeopleSoft in a $10.3 billion deal. The security software space had its own whopper of a deal last week, with Symantec purchasing Veritas for $13.5 billion. Some of technology's heavies made smaller acquisitions as they seek leverage in the bigger battles for consumers' eyeballs and wallets. Microsoft recently added an anti-spyware firm into its empire, and Google has been boosting its search services by buying technology firms, such as its October purchase of digital mapping company Keyhole Corp. The giant Sprint-Nextel deal sets up a three-way battle for subscribers in the wireless industry in 2005.

8. iPod Nation: The iPod digital music player not only boosted Apple's bottom line in 2004, but also gave a big boost to the popularity of MP3 players and the commercialization of legal music downloads. Not since the debut of Sony's Walkman in the 1980s has a tech gadget become such a cultural phenomenon. Meanwhile, Apple's iTunes Music Store and competing services from Microsoft, RealNetworks, and even Wal-Mart are proving that fans can be trained to use the Internet to purchase music, instead of just downloading it for free from one of the many renegade file-sharing services. Case in point: Apple said last week that iTunes has sold more than 200 million songs so far.

7. Pay-For-Play: As Apple succeeds in getting people to pay for music downloads, the underground world of swapping copyrighted material online continues to grow. The Recording Industry Association of America and the Motion Picture Association of America continued their legal campaign against Internet piracy in 2004, but it's debatable whether slapping consumers and Internet service providers with lawsuits is cutting down on the problem or just pushing the practice into a deeper black market. The entertainment industry trade groups are showing no signs of letting up. But all eyes will be on the Supreme Court next year, as the justices weigh whether the makers of file-swapping software are responsible for their customers' violation of copyrights. Over in Congress, lawmakers debated several laws that would have imposed even tougher penalties on file-sharers. Congress will surely debate the copyright issue again next year, and, as my comrade David McGuire concluded, the direction lawmakers will take on copyright protection legislation in 2005 is an open question.

6. The Song in the Sky: It wasn't that long ago that it was an open question whether the two satellite radio companies -- XM and Sirius -- could lure enough customers to stay afloat. The past year certainly showed that the profit potential is there. Last month, Sirius hired ex-Viacom head Mel Karmazin as CEO and also brought on raunchy DJ Howard Stern in a $500 million deal. XM, for its part, hired NPR veteran Bob Edwards and continues to lead Sirius in the subscriber race. Will satellite radio turn FM into the next AM backwater?

5. Squelching Spyware and Spam: Cyber-security threats only got worse in 2004, just like all the experts predicted last year. Spam, by some estimates, now makes up 60 percent of all e-mail messages sent across the Internet. Spyware, meanwhile, infects 67 percent of all PCs connected to the Web, according to a recent study. "Phishing" attacks, which lure unsuspecting PC users to bogus online sites to steal financial and other private data, took off in a big way in 2004. New laws and a rash of lawsuits targeting online scammers look nice in the headlines, but aren't likely to make a dent in Internet crime. So what is to be done? It's going to take more diligence from individual PC users -- arm your PC with updated firewall, anti-virus and anti-spyware programs, and don't forget to download regular updates for your operating system (particularly if you are one of the more than 90 percent of PC users on a Microsoft-powered system).

4. Firefox Rising: Netscape came back to challenge Microsoft's Internet Explorer Web browser in 2004, this time in the form of Firefox, the browser application built by the Mozilla Foundation and based partly on the original Netscape engine. Since the release of its version 1.0 last month, more than 10 million copies of the free application have been downloaded, putting a small dent in Internet Explorer's otherwise commanding lead and prompting raves from tech reviewers.

3. Open Sesame: The success of Firefox gave the open-source movement additional clout over the last year, but it was the continued mainstreaming of Linux that made headlines over and over again in 2004, as governments, big businesses (Intel and IBM!) and regular home users increasingly took steps away from proprietary software. Microsoft, as the world's dominant software firm, has the most to lose from the rise of Linux. In September, the company wrote in an SEC filing that open source software is a growing threat and noted "IBM's endorsement of Linux has accelerated its acceptance as an alternative. ... Linux's competitive position has also benefited from the large number of compatible applications now produced by many leading commercial software developers as well as non-commercial software developers."

2. Blogs Get Real: Web logs have become so mainstream that Merriam-Webster reported that the word "blog" was the most looked-up word of 2004. Blogs started ages ago in Internet time, but what was new in 2004 was the attention they finally got from traditional media outlets. Blogs were put under the spotlight during the Republican and Democratic national conventions, but it was on Election Day that they perhaps had their biggest impact, when numerous bloggers posted early election exit poll data. "Are blogs journalism?" was a big question of 2004.

Perhaps the question in future years is whether journalism itself evolves into endless blogging. Tech giants are certainly betting that the blog revolution is here to stay, with Microsoft rolling out its own blogging software. Nick Denton's Gawker Media empire, which includes the popular Wonkette, is surely a sign that the profit potential is there.

1. The Search For Dominance: Google's wildly successful IPO helped shine the light again on the search engine industry and its potential to attract advertisers and profits. And it was Google that set the pace for the search-engine wars time and again in 2004. In the spring, the company unveiled a beta version of its Gmail e-mail service -- offering users 1 gigabyte of free storage. That move alone quickly forced Yahoo and Microsoft to up the paltry storage limits they already offered to their e-mail users. Google then offered up its own desktop search tool, beating Microsoft out of the gates. So if Google established a big lead in 2004, that means it has a target on its back in 2005. Watch the company's stock price as Microsoft digs deep into its bank account to catch up, and don't forget all those little start-ups in Silicon Valley. Somewhere out there could be the next Sergey Brin and Larry Page.

Your Top 10 Takes?

Drop me a note with your nominations for 2004's biggest tech trends. I will publish selected reader comments after the holiday break. Please include your full name, city and state.

Happy Holidays!

Thanks for putting Filter on your bookmark list and for your e-mail feedback. I'll be taking the next two weeks off. But Filter will be back online Jan. 3, with my colleague Robert MacMillan filling in; I'll be back online on Jan. 5. To get your Filter fix until then, check out the archives.

Have a safe, happy holiday. Enjoy your eggnog, don't linger under the mistletoe too long and see you online in 2005! Happy New Year!

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