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The Future Of 3G

The future is wireless, or at least that is what Nokia, Ericsson and a host of startups and network operators are earnestly hoping. But the quick success of 3G – The Third Generation of mobile telephony – is more than profitable icing for these companies; it has now become a matter of survival….

This article, which ran in the February, 2001 issue of Tornado Insider magazine, looks at the overall climate in European development of 3G, and then explores how each of Europe’s largest telecom networking manufacturers, Ericsson and Nokia, is coping with the challenge.


Driving through the freezing streets of Kista, Sweden, I’m trying to look nonchalant while conducting a third-generation (3G) mobile-video teleconference. We’re bouncing over the cobblestones and chatting with a spokeswoman back at the Ericsson 3G center. Simultaneously, I’m downloading CD-quality streaming audio from the Web.

This would be a typical PR exercise if not for the fact that our “handset” – a modified three-ton Volkswagen passenger bus – is somewhat bulky.

“There are no actual handsets yet,” apologizes Viktoria Eklund, a marketing manager for Ericsson who is acting as our tour guide on Ericsson’s 3G Magic Bus, “so we have to use regular networked PCs. But the connection is totally 3G wireless.”

Eklund’s point is compelling. I’m interacting across a wireless connection of 472 kilobits per second packet-switched and 328 kilobits per second circuit-switched. That’s faster than Deutsche Telekom can pump anything into a Munich home phone line no matter how much is offered in payment.

The importance of all this goes well beyond high technology for its own sake. The commercial success of large-scale 3G mobile systems is literally the key to survival for many of Europe’s mobile operators in the coming five years. It’s estimated that the more than $100 billion they spent on licenses alone must be followed by $120 billion to $200 billion in infrastructure spending.

“…By the time operators roll out the monumentally over-hyped 3G, their financial world will be different: Their credit ratings will have been battered, cruise ships-full of cash will have been spent, and the economic outlook will have changed….”
This makes 3G the juiciest opportunity to develop and exploit a diverse basket of new technologies since the heady days of the United States’ battle to conquer the moon ahead of the Soviets. It is also perhaps as risky. Much of the initial burden for hot-housing the companies that will deliver the applications and services destined to roll out with 3G, has been placed squarely on the shoulders of the two industry leaders, Ericsson and Nokia, as well as on their venture capitalists, strategic partners, and entrepreneurs they back. It may prove make or break for all of them as well.

There is much more riding on 3G than simply giving users more bandwidth and fancy applications. “When the operators are buying all this 3G infrastructure,” says Marie Bern, investment manager at Speed Ventures in Stockholm, “they are asking the vendors to prove the business case. If there are no compelling services and no convincing revenue models, there’s no case.”

It is always a risk for application developers to create for future technology platforms. One never really knows how long it will take before there is a critical mass of customers. Usually it takes far longer than the network vendors claim, which makes the business case for huge investment very vulnerable. To survive and be successful, developers need the support of venture capital firms and their networks, as well as the network vendors.

“When this collaboration works it’s really a win-win situation for all parties,” Bern says. The hot-housing is so crucial that it can be the difference between invest and don’t invest decisions. “When you look at an investment, you look at the team, the business idea, the partners, and the customers. In this case, the network vendors are the business partners,” Bern adds.

Anders Bons, Swedish bank SEB’s senior advisor for mobile business strategies and project leader for SEB mobile services, agrees. “The [networking hardware] vendors have finally started to realize that what they need is proof-of-concept by supporting real and valuable applications like mobile banking,” he says. “It’s not enough to have just artificial applications – like letting you buy a coke from a vending machine – to prove the value.”

The Climate
By the time operators roll out the monumentally over-hyped 3G, their financial world will be different: Their credit ratings will have been battered, cruise ships worth of cash will have been spent, and the economic outlook will have changed. In addition, the mainstream press will have incited the public to demand everything from postage-stamp-sized, user-friendly multimedia terminals with high-resolution streaming video-teleconferencing and video postcards, to robust new applications that will change lives, all for the cost of a 3G terminal and some airtime, of course.

Operators, in turn, will demand of the manufacturers not just networks, but rather complete end-to-end systems with turnkey, bundled applications. As was proven by the runaway success of what until recently seemed trivial applications like SMS and downloadable ring-tones, neither the vendors nor the operators have the foggiest idea which applications will be popular and which will simply be a waste of bits.

Will mobile-video postcards, as Nokia expects, eat into the lucrative “analog” postcard industry? Will location-based services compel games and useful business information, or merely irritate by beeping mobile phones every time someone passes within 300 meters of a McDonald’s?

Vendors believe that the only way to meet the needs of the 3G user base, which isn’t demanding anything specific yet, is to try to get as many applications as possible up and running as fast as possible. For their part, the operators are busy building locally-driven services and forging regional business alliances. But the cost and difficulty for operators to develop custom-built portfolios of applications and services specific to their network make the “walled garden” approach neither sensible nor desirable.

3G requires diverse technologies to converge, and quickly. In the US space program, parallel and massive technology initiatives were undertaken in everything from food processing to rockets, satellites, miniaturization, and computer and communication systems. The contractors couldn’t foresee the ways in which their technologies would interact. But they changed the world by developing technologies that would become miniaturized computers, the GPS satellite navigation system, and even Tang, the orange-drink powder.

The companies involved with the drive toward 3G systems are in a similar position. In order to succeed, 3G needs seismic advances in network, display, power, and size-factor technology plus other aspects such as personalization elements. NASA had 12 years to get it all done, 3G has perhaps two years.

Data breaches may be new boon for mobile security

We’ve noted recently that laptops are becoming ever more portable, holding more data and processing power than ever before, and rapidly replacing the enterprise desktop as a primary computing device. We also noted that along the way they are fast becoming a major point of security failure that enterprises must address.

That proved a timely assertion, especially now that the nation’s mainstream media is buzzing about the theft from a U.S. Department of Veterans Affairs (VA) employee of a laptop computer and CD-ROM containing personally identifiable information (PII) of at least 26 million veterans. It’s safe to say that the data loss and intellectual property theft associated with mobile laptops and storage devices is a hot topic. Veterans groups have filed a lawsuit against the VA in connection with the breach, seeking $26.5 billion in damages. This monetizes – perhaps for the first time on such a large scale – the problem.

Nearly 85 million records containing PII have been compromised since February 2005, when Alpharetta, Ga.-based ChoicePoint Inc. announced the loss to hackers of 145,000 records containing PII. Ten days later, another breach announcement was made, but this time the problem wasn’t hackers – it was butterfingers: Bank of America in Charlotte, N.C., announced that it had lost an unencrypted backup tape holding 1.2 million records containing PII. Not stolen or hacked… lost.

We reckon that 40% of those 85 million compromised records were lost not to evil hackers cleverly breaking through security or social-engineering credentials from unsuspecting employees, but instead to stolen or lost laptops, computers or backup tapes, or inadvertent emailing. This kind of data compromise is a national problem affecting everything from small business, to all sizes of enterprises, to government on every level. It’s also a massive opportunity because to a large extent, this problem can be reduced.

Compliant or secure?
Much marketing ink has been spilled around the word ‘compliance’ in the past couple of years. The term sometimes refers to compliance with state regulations, like California’s, New York’s and Connecticut’s regarding data breaches. But more often, it refers to compliance with federal regulations and industry guidelines, like SOX, HIPAA, the Federal Financial Institutions Examination Council, the Payment Card Industry Data Security Standard and other acronym-laden best-practices lists designed to introduce more accountability and technical oversight into the worlds of enterprise and government data.

The ChoicePoint announcement rang in de facto national compliance with the California state law requiring notification of affected parties of a breach in security, confidentiality or integrity of unencrypted data containing PII. For each reported breach, press coverage intensifies. As identity theft becomes more common and better publicized, the consumer response to such data compromise has become angrier, which leads to still more media coverage. Data loss, which used to mean some bad PR if you got found out, now means an instant share price punishment, heaps of bad publicity and customer rage. Those are the three most significant drivers of enterprise adoption of security products.

The biggest immediate winners would seem to be mobile device security vendors. Companies like Bluefire Security Technologies, Credant Technologies, Mobile Armor, PGP Corp, Pointsec Mobile Technologies, SafeBoot, Trust Digital, Utimaco Safeware and WinMagic all offer products that encrypt sensitive data on enterprise mobile computing and storage devices.

Mobile device security
For the past several years, vendors in the mobile device security space have been hollering their heads off about just these issues. Mobile device security in this case boils down to the ability to encrypt sensitive data on the hard drive and removable media of any device or storage media capable of being carried out of the enterprise.

That’s a sensible enough goal, and unlike the case with intrusion detection or edge defense, most people can intuitively understand it. In this space there are religious differences – a constant discussion over whether it’s best to encrypt every single bit that hits the hard drive, or selectively encrypt only the data deemed by some policy to be ‘sensitive.’

And there are logistical challenges. Think of how many devices are capable of taking a walk with 60,000 or 6 million records, and your thoughts would have to extend to laptops, mobile phones, CDs and DVDs, USB flash storage drives and mass storage devices like iPods, MP3 players, digital cameras and the like, plus backup tapes, external hard drives and tape drives… There’s a pretty long list.

Most, if not all, of the vendors in this space build in some kind of remote-destruct feature to thwart Fred from Purchasing from absconding with the company sales list: The device typically phones home on boot and gets instructions, or checks in when connected to the Internet. This is all useful stuff of course, but the main concern most people have is whether disks can go on a walkabout without endangering the customer data and the company’s reputation.

The reason we say that vendors in this space will benefit from the recent events far faster than those in others (such as, for example, database protection, storage encryption and key management and the worlds of intellectual property loss prevention) is because the technology is simple, fairly cheap and can be deployed on what you have now.

It’s a fairly easy purchase that the enterprise doesn’t have to live with forever – the technology on which it is deployed, often a laptop or handheld, will almost certainly be replaced in three to five years (as opposed to a database protection system, which would be expected to last longer, or storage encryption and key management system, which would be expected to last until the end of time, or at least a decade). Also, mobile devices are frankly the most likely to be lost or stolen or otherwise compromised – like when an employee is fired and ‘forgets’ to return it.

Partial disk encryption sets aside areas of the disk to be encrypted, and/or examines content to determine by policy whether the information is sensitive. And these days, products from companies like Bluefire, Credant and Trust Digital offer extremely granular controls over what sensitive means, including encryption of all data from certain applications, data containing patterns (such as Social Security and credit card numbers) and other triggers. Whole-disk encryption encrypts everything on the disk. The arguments against this are as numerous as those for it and revolve around restoration of system files and re-provisioning without destroying all the data. Mobile Armor, PGP, Utimaco’s SafeGuard Easy and WinMagic all offer robust whole-disk encryption products.

All these vendors offer controls, from basic to fairly sophisticated, to ensure that data saved to removable media of any sort is encrypted. This stops short of products from M-Systems, which place an agent on Windows machines preventing all but M-Systems hardware-encrypted USB drives from being mounted by the computer, and requires all data stored on the removable media to be encrypted; a central management system handles provisioning, remote-destruct, lost passwords and other features. Safend, GFI Software and other companies have less granular systems that provide control of all external media devices as well.

Compliance – in this case, compliance with best practices that result in your enterprise’s name not featuring prominently in the national media – is the key driver for these technologies, and the sky is the limit. The terabytes of data just floating around unencrypted on removable media only scratches the surface of the problem. That special report we published on mobile laptops as desktops points out that mobile laptop deployment already outpaces that of desktops. After the third loss of a laptop in a year (resulting in the compromise of at least 280,000 records), Ernst & Young is said to be looking into an enterprise-wide encryption policy. More of those will be forthcoming in the immediate future. And the mobile security vendors will try as hard as they can not to say "We told you so."

Software Pirates Rule In Russia

russia_piratesEvery day here and in dozens of other Russian cities, pirate dealers sell copies of the world’s most popular software titles at $5 per CD-ROM.

Despite fears about the economy, small and medium-sized businesses are flourishing in this elegant northwestern Russian city – and pirated software is installed on almost all of their computers.

Nearly all high-end computer games, Encyclopaedia Britannicas and other educational and reference CDs are distributed through illegal sources.Bootlegged software use is certainly not limited to Russia. Industry analysts say that 27 percent of the software running on American computers is pirated.

And the Business Software Alliance, which monitors business software piracy, says 43 percent of PC business applications installed in Western Europe are illegal copies.

In Russia, however, the piracy rates are a stunning 91 percent for business applications and 93 percent for entertainment software, according to Eric Schwartz, counsel to the International Intellectual Property Association, a Washington, D.C.-based organization that lobbies internationally on behalf of the copyright industry.

Schwartz said that piracy in Russia costs American entertainment software manufacturers $223 million a year and business software makers almost $300 million. The Business Software Alliance estimates worldwide revenue losses to the software industry from piracy at $11.4 billion.

Under the 1992 agreement with the United States that guaranteed Most Favored Nation trading status, Russia is required to effectively enforce anti-piracy laws, but actual enforcement is virtually nonexistent.

Meeting the Dealers

The dealers, who operate in stalls and kiosks around major transportation hubs or in full-scale markets usually 15 minutes from the city center, offer an enormous range of titles, usually bundled in a form their manufacturers would never dream of.

“That’s Windows 98, Front Page 98, Outlook 98, MS Office 97 SR1 and, uh, yeah, Adobe 5.0,” said Pyotr R., a student at St. Petersburg Technical University, of a single CD-ROM. “On the disk there are files, like ‘crack’or ‘serial’ or something, and that’s where you’ll find the CD keys,” he said, referring to the codes that unlock CD-ROMs and allow users to install the programs.

Pyotr (who spoke, as did all others interviewed for this article, on condition of anonymity) sold that disk, plus a second one containing Lotus Organizer 97, several anti-virus programs and some DOS utilities, for 60 rubles or about $10.

Another dealer was offering Windows NT 4.0 for $5, and Back Office for $10. According to Microsoft, the recommended retail prices for these products are $1,609 and $5,599.

Many Russians, who during the days of the Soviet Union bought most necessities through black market sources, think nothing of buying their software this way. They even defend the markets as providing a commodity that had been long-denied them.

After the collapse of the Soviet Union, inexpensive computers began to flood into the country from Taiwan, Germany and the United States, increasing the importance of these illegal software markets. Spending at least $800 on a computer was an enormous investment for Russians, even relatively well-paid St Petersburgians who earn an average salary of around $350 a month. Those who did buy one were in no position to consider purchasing software legitimately, even if it were readily available, which it often wasn’t.

These days, though, legitimate outlets for hardware and software are popping up everywhere in Russia; computer magazines offer licensed versions of everything available in the United States and Western Europe, and software makers advertise in the city’s well-established English-language media.

The markets continue to thrive with an alarming degree of perceived legitimacy. Outside the Sennaya Square metro station in St. Petersburg, a police officer approached a pirate dealer (who offered, among other things, Adobe Font Folio and QuarkXPress) and angrily chastised him for not prominently displaying his license to operate the stall. When the dealer complied, the policeman moved on.

Customers feel secure that the pirated copies will work and that belief appears well-founded. Bootlegged titles come with a written guarantee – good for 15 days from the date of purchase – that they’re virus-free and fully functional.

And files on the CDs themselves boast of high-quality, code-cracking techniques: “When so many groups bring you non-working fakes, X-FORCE always gets you the Best of the Best. ACCEPT NO IMITATION!” boasts one.

“There’s a lot of viruses around in Russia,” said Dima V., a system administrator who runs several small company networks in St. Petersburg using bootlegged copies of Windows NT 4.0, “but most of the disks you buy in the markets are clean. The guys are there every day and if they give you a virus you’ll come back – it’s just easier to sell you the real thing.”

Foreigners get in on the action

Russians are not by any means the only people installing the pirated programs. While employees of multinational companies or representatives of American companies would never dream of risking their job by violating copyright laws, self-employed Westerners, or ones who have established small Russian companies have no qualms about doing so.

They also pose a question software manufacturers find difficult to answer: Who would buy a network operating system package for $5,000 when it’s available for $5?

“Nobody,” said Todd M., an American business owner in St. Petersburg, whose 24-PC network runs a host of Microsoft applications that were all bootlegged.

“There’s just no financial incentive for me to pay the kind of prices that legitimate software costs,” he said. “I mean, it would be nice to get customer service right from the source, but we have really excellent computer technicians and programmers in Russia and they can fix all the little problems that we have.”

Customer support and upgrades are just what the manufacturers point to as advantages of licensed software, even in markets like Russia.

“There are enormous incentives,” said Microsoft’s Mark Thomas, “to buying legitimate software, and they start with excellent customer support and service and upgrades. We spend $3 billion a year on research and development and the money that we make goes right back into making products better and better products. The pirates don’t make any investment in the industry.”

And local industry, Thomas pointed out, suffers disproportionately in the face of piracy.

“A huge amount of our resources are put into making sure local industry builds on our platform,” he said. “When a local company creates packages for, say, accounting firms, and somebody can come along and buy it for $5, these local companies can lose their shirts.”

Piracy getting worse

Despite heavy lobbying by industry representatives and government agencies, piracy has worsened. As CD copying technology becomes cheaper, large factories in Russia and other countries, including Bulgaria, churn out copies of software copied by increasingly sophisticated groups in countries around the world, especially in Asia.

Encyclopaedia Britannica wrote off Malaysia as a market effectively destroyed by pirates, who sold 98 out of every 100 copies of its flagship Encyclopaedia three-CD set for a fraction of its recommended retail price of $125. The same disks, which have not officially even been offered for sale in Russia, are readily available in the St. Petersburg markets for $10.

“For Encyclopaedia Britannica, the cost of piracy is millions a year,” said James Strachan, EB’s international product manager. “One hundred percent of the value of our product is an investment in the authority and depth of our content,” he said. “Piracy causes us extreme concern and we do everything we can to root it out and prosecute.”

Todd M., the businessman with the 24-PC network, offers little hope that the situation will soon change in favor of manufacturers.

“With all the problems I have running my business here in Russia, from armed tax police to Byzantine procedures and customs duties, software piracy just doesn’t register with me,” he said.


“It’s the one thing about doing business here that’s somebody else’s problem.”

Infineon Breaks Losing Streak

Infineon Technologies on Monday posted a fourth-quarter profit, ending nine quarters of losses.

Infineon, the world’s sixth-largest maker of semiconductors, said net income was E49 million, or $56.5 million, compared with a loss of E505 million a year earlier. Revenue rose 37 percent to E1.76 billion.

For the year through September, the company reported a net loss of E435 million, compared with a net loss of E1.02 billion in 2002. Sales rose 26 percent to E6.15 billion.

“It’s good, but we fully expected this a quarter ago,” said Andrew Griffen, European semiconductor analyst at Merrill Lynch. “I can’t criticize what they’re doing – those who criticized them for investing heavily two years ago are now seeing those investments returning profits. But they’re in a tough industry, and their shares are overvalued.”

At the company’s annual news conference, Ulrich Schumacher, president and chief executive, cited cost savings through job cuts and outsourcing as well as an increase in the price of its core D-RAM products and reductions in its cost of producing them.

Schumacher said profit from the sale of Infineon shares in the Taiwan chipmaker ProMos had also added to the bottom line.

Fully 57 percent of revenue originated outside Europe, the Munich-based company said: 34 percent from Asia and 23 percent from North America.

Infineon also said it had become the third-largest chipmaker in the United States, overtaking Texas Instruments. Worldwide, Infineon said it had 4 percent of the market in semiconductors, up from 3 percent.

The company said it was on track to achieve its goal of 6 percent market share by 2007. It said that it expected demand for personal computers to increase in the current quarter and that the holiday season looked especially promising.

Peter Fischl, chief financial officer, said Infineon had set said E28 million to prepare for a possible adverse outcome of a U.S. Department of Justice investigation of price-fixing in the market for D-RAMs, chips that expand personal computer memory and help more programs operate simultaneously. Both Washington and the European Commission have been investigating any Infineon role in alleged price-fixing scheme.

Schumacher, asked about plans to move Infineon’s headquarters from Germany to a more tax-friendly country, said that the company was actively exploring the possibility and that it was not just a question of costs but also of productivity and speed to market.

“In our Chinese factories we are able to work three shifts per day seven days a week,” Schumacher said, adding that labor laws and work force costs in Germany constrain the company to work far fewer hours. “To ignore this is to imperil our very existence.”

E-Tail Sales Burst Through The Rooftops

From the U.S. bellwether to the German catalog retailer to in Hong Kong, online shops around the world are hoping for a holiday season of double-digit sales growth – a small beacon of light amid stock downturns, flagging tech spending and stagnant corporate sales.

Leading the charge is Europe, where some forecasts even call for triple-digit increases over last year.

“We have seen a growth rate this year in excess of 100 percent,” said Jon Prideaux, executive vice president of Virtual Visa Europe. “A given retailer might not see precisely that, but we’ve seen monthly sales increases of 18.5 percent, so a double or more increase over last year is very likely.”

European e-tailers are gaining over the pioneering Americans because more consumers who are relatively new to the Internet are in Europe, said Japp Favier, research director at Forrester Research Inc.’s European operations. The United States has fewer newcomers, so growth is somewhat flatter this year.

The German e-tailer KarstadtQuelle, the online arm of the Karstadt department store and Quelle appliances, says 30 percent of its online sales this year – which should come in at E1.2 billion ($1.2 billion), a 70 percent increase – are coming from first-time customers.

“The average time between first plugging in the computer and buying something is 18 months, and the first purchase is usually a CD or book,” Favier said.

Overall, Forrester expects that European online retail sales this holiday season will rise to E7.6 billion from about E4 billion, bringing the total for the year to E30 billion, up from E15.5 billion.

In Asia, the situation is more fragmented. Cultural nuances and logistical barriers do not always turn new Internet recruits into online shoppers.

For example, in Hong Kong and Singapore, Internet and broadband penetration levels are among the world’s highest, but online sales lag significantly behind Europe’s and North America’s. In China, consumers want to actually touch the merchandise to make sure it works before they buy, analysts say. But e-commerce is still gaining in markets like South Korea, Japan and Taiwan. While there is little religious significance to Christmas in much of Asia, the idea of a “holiday season” may be catching on.

“The fourth quarter is increasingly becoming a shopping season in Asia-Pacific,” Lane Leskela, a research director for Gartner Inc., said in a recent report. “Christmas has penetrated the local culture of many non-Christian societies as a gift-giving celebration.”

Hong Kong’s top shopping destinations are the Yahoo shopping and auction sites. Quinnie Ng at Yahoo Hong Kong said the sites had seen a 160 percent rise in total customers this year. But in actual numbers, she said, the base is small.

Peter Steyn, Nielsen/NetRatings director in Hong Kong, said: “People in Hong Kong and Singapore go online to browse, compare prices and functions. Then they hop across the street and buy in a shop.”

In Europe, retailers have matured somewhat on the Internet over the past several years, and consumers have gotten used to them.

“People are finding it more convenient to buy online,” said Brian Morris, who heads e-business for MasterCard Europe. “And with the move to the euro, it’s become easier to do comparison shopping with Web sites in different countries.”

Even in markets where credit cards are often spurned as a payment method – such as Germany, Italy, Japan and China – e-tailers are getting creative and consumers are responding. Amazon will send bills by mail in Germany and accept cash on delivery in Japan. Many Japanese customers buy online and have the goods sent to a 7-Eleven outlet, where they pay with cash.

“Some people actually bring cash to the office,” said Fritz Demopoulos, founder and former chief executive of and now senior consultant to in Beijing.

“We have seven different ways you can make payment, like bank wire transfers, debit cards, prepaid cards.”

Internet buying is still a small fraction of overall retail sales. And online sales are seldom net gains – they are sales that have moved from the store cash register to the personal computer. But purchases made online generally cost the retailer less to process than face-to-face sales. Even in struggling retail sectors, such as consumer PCs, this shift has been notable.

“Overall, sales have stagnated,” said Massimiliano Bancora, Web and marketing director for CHL, one of Italy’s largest computer retailers, “but sales initiated online have increased by 20 percent this year.”

Regis Brinster, Geneva-based interactive marketing manager for Iomega International, a computer-storage maker, said: “We launched online sales two years ago, and they have grown to about 1 percent of our total European sales. To achieve this level of sales so quickly on a supplementary channel, without investing in a call center, makes this really outstanding.”

To more effectively balance loads and keep peak drain on their systems to a minimum, European retailers have encouraged early shopping. Amazon’s sites, Iomega International, British retailers like Argos, and many others offer incentives such as free shipping for orders placed before early December.

“If you’re going to compete with the high street experience, you need higher levels of customer service,” said Ian Loughran, managing director of, a Belfast-based video retailer.

Blackstar meets with Royal Mail representatives to plan for peak delivery periods such as holidays or during the release of hot movies.

That everything works is especially important to first-time buyers. If things do not go as planned, the next sale will be much slower in coming.

On the other hand, too much customer service can be a hindrance, and Internet stores can answer that need, too.

“I don’t need sales help to buy a movie,” said Lee Evans, a Berlin-based travel consultant.

“On Amazon, I type in the movie name and buy it. I don’t have to fight the throngs. Then I can go downtown, stand in the Christmas markets, drink the mulled wine and look at the lights with my family.”

Standards Battle? What Standards Battle?

A standards battle of VHS-Betamax proportions has been brewing, and the winner will control how you copy DVDs on your home computer. Among those least concerned about who wins is Roland Lacher, the outspoken chief executive of Singulus Technologies AG, based in Kahl, Germany.

“Philips DVD+RW will win the battle,” Lacher said. “DVD-RW and DVD-RAM will die.”

Not that the outcome really matters to Lacher. His machines will probably manufacture the DVDs you buy, regardless of which standard wins.

Singulus, the leading manufacturer of the machines that make optical disks (including DVDs and CDs), is doing well despite the standards war.

When CDs – plastic platters coated with metalized film that reflects laser light – were introduced 20 years ago, optical disks became an exciting new market.

By pitting the metallic surface, manufacturers can create light and dark spots. A light spot is read as a “1,” a dark one as a “0.” Measure these digits 44,100 times a second and the disk will recreate audio with startling clarity.

The catch is that to create a uniform, nonbubbling metalizer, you need extremely good – and extremely expensive – technology. And to create the machines that make the disks, you need lots of know-how.

With access to a labor pool of university-educated employees and Ph.D. researchers, Singulus says it has overcome the German obstacles of high wages and taxes and expensive travel to the company’s main markets: the United States and Asia.

“We do 100 percent of the R&D and engineering here,” Lacher said, “and outsource 100 percent of parts and components.”

To market the products, the company established scores of corporate subsidiaries, bypassing sales agents with local representation.

The formula seems to work. Although the Swiss-based company Unaxis Holding AG competes in components of the systems, Singulus has become the world leader in complete CD and DVD manufacturing systems.

Last year, Singulus said, it booked 182 DVD systems, or 65 percent of worldwide market share. (A metalizer starts at E130,000 while a DVD-recordable machine costs more than E1 million.)

Singulus posted E35 million ($38 million) in net profit last year on revenue of E286 million. Both figures grew about 25 percent from 2001, beating the company’s own expectations of a 20 percent rise, and it did so with 13 percent profit margins.

To say that investors associate Lacher with the company’s trajectory is like saying there’s some banking in Frankfurt. Lacher has an outspoken and steadfast vision for the company he helped create.

He ran Leybold AG’s thin-film coating systems division, where he oversaw research and development, sales and production in the 1990s.

Along with outside investors and a Leybold manager, Reiner Seiler, Lacher led a management buyout of Leybold’s CD business in 1996. Singulus went public in 1997.

Since then, advances in computer speeds and hard-drive technologies have rendered the 650-megabyte CD almost quaint.

A market boom is being fueled by worldwide appetite for storage capacity for movies, games and data, as well as in new DVD technologies such as the Blu-ray Disc, which uses the shorter wavelength of blue light to afford denser data storage. (Singulus said it would make the Blu-ray standard as well.)

The company’s customers are mainly DVD and CD makers in the entertainment and computer industries. Its machines have been used to produce CDs with holographic images for Microsoft Corp. and Technicolor, a division of Thomson Multimedia SA.

Product lines include Skyline CD-audio and CD-ROM making machines (38 percent of sales), Spaceline DVD systems (37 percent), Streamline recordable-CD systems (10 percent) and Singulus metalizers (3 percent).

Equipment sales have been picking up in the United States and Europe, and analysts estimate that the market will enjoy steady double-digit growth in the next two years.

In Asia, as DVDs start to replace the more common CD-Video format (an Asian standard for movie disks), saturation may be postponed even further.

Analysts are impressed with the company’s technology and management. But the analysts, investors and the company itself realize that once the market is saturated, Singulus will need to have another product lineup waiting in the wings.

Lacher is gambling that that product will be nonvolatile computer memory, or M-RAM, easily appreciated by anyone who has ever lost power while working on a spreadsheet, as it holds its data even without being powered.

Singulus is betting that the similar technologies used in making chips and disks will help it enter the semiconductor market.

As with DVDs, making M-RAM is essentially a matter of putting very thin film on a substrate and sandwiching it together with a sort of di-electric mayonnaise.

Analysts concede the logic on paper, but they also wonder whether the company can successfully break into a consolidating industry with high entry barriers and an entirely different breed of customers.

“It’s a pretty conservative industry,” Bruno Winiger, analyst at Vontobel Holding AG in Zurich, said in referring to the memory chip field.

“They use proven technologies, and they’re not fond of experimenting with things. It’s not just the technology but also the long-lasting connections to the players in the market. It’s a different customer base, and a different way of selling.”

Qualifying as a chip supplier to a company like Toshiba Corp. in the semiconductor market – where products are routinely one ten-thousandth of the thickness of a human hair – involves a more stringent process than in other industries.

To succeed in this market, a start-up needs to offer a product that is drastically superior to that of the competition.

“More established semiconductor companies such as AMD and others just have more resources to draw on for R&D, and they can draw on three decades of semiconductor manufacturing experience,” said Uche Orji, who heads the European semiconductor team at JP Morgan in London.

Furthermore, the semiconductor industry is consolidating – looking for fewer, not more, suppliers. That development, Orji said, “is a lot more challenging than people may expect.”

Lacher said he was not deterred by the odds.

“Everything’s a risk,” he said. “We think it’s a managed one. We’ve got the technology ahead of the competition.”

And if it fails?

“We’ve invested E5 million in this over two years,” Lacher said. “Look at our balance sheet – that’s pocket change.”

Broadband’s Here. Where’s The Content?

With the launch of BTOpenworld and broadband announcements by major telcos across Europe, investors have been increasingly wondering just what it is that will be delivered so quickly. As hardware manufacturers from Nokia and Alcatel to Hewlett Packard and IBM are gearing up to deliver rich, interactive content such as video-on-demand (VOD) and video teleconferencing on a variety of systems, analysts and industry watchers are still split as to who will make the content and what it will be.

UK-based Yes Television and BTOpenworld announced that they will pilot BT Yes Television, to deliver VOD to televisions via ADSL enhanced phone lines in London. And Filmgroup, a film distribution company competing for the same UK VOD audience via its web portal, announced its intention to float on the London Stock Exchange in the second quarter of 2000.

“VOD is an interesting experiment,” said Lars Godell, Analyst for European Corporate Technologies at Forrester Research, “so far it hasn’t taken off in previous trials around the world – there are very serious players interested in producing the kind of rich content the broadband net will need, but many have held back some of their most ambitious plans because of the free nature of lots of internet content and copyright issues.”

Those very issues have been addressed quite a bit recently, and the announcements last week of a joint venture between Microsoft and Xerox in ContentGuard, web-based copyright protection software, as well as rulings against in a copyright infringement suit, may clear the way for more smaller companies to risk investment in production of broadband specific content.

Always On
To be sure, companies such as Bertelsmann and Time-Warner, owners of large film libraries, are looking to explore new ways of exploiting their content in a European broadband marketplace. But analysts differ in their take on where content for broadband will go. While Forrester is bullish on very rich, interactive video-on-demand and other TV-like programming for broadband, Jupiter Research analyst Noah Yasskin believes the opposite is true.

“Primarily, broadband will be an enhancement of existing applications and services as opposed to some sort of TV-like revolution,” said Yasskin, “There will be some richer media, and more possibilities for advertising and video, but we think that more important than the speed is the ‘always-on’ aspect – that’s the real change for consumers.”

Industry watchers agree that a constant connection to the web at a fixed price is a crucial aspect of broadband’s success. “Very clearly this type of service will boost e-business,” said Joeri Sels, telecommunications analyst for Julius Bär in Frankfurt, “It doesn’t matter whether it’s ‘flat rate’ or just a very cheap, reliable fixed-base rate, but the important thing is that the general trend towards ‘always-on’ is certainly in motion.”

Always-on, says Yasskin, will cause fundamental changes in European use patterns, by making it as easy to check the web for basic information like weather and local news as it currently is to check in the newspaper.

Local And Pan-European Content Development
In addition to “always on”, the trick in Europe is to provide international, national and truly local coverage in ways that broadcast television has never been able to, and companies such as Chello (owned by United Pan-Europe Communications (AEX:UPC, Nasdaq:UPCOY), anticipated to be spun off and go public in Europe in the second quarter of 2000), are poised to do just that.

“That’s Chello’s core philosophy,” said a source close to the company, “to provide global but then also very local coverage – so users in Vienna and in Innsbruck would see absolutely different local content.” Chello, BT, France Telekom and Deutsche Telekom are clearly heading in the same direction, as can be seen by BTopenworld’s list of over 50 content providers.

So producing the local content, and therefore competing with US companies such as Atom Films and Digital Entertainment Network is the challenge for smaller European startups, and in that area the playing field is still wide open; small companies such as the UK’s ProteinTV, which won’t go public for at least a year, are very nervous about launching too quickly and getting swallowed, or worse, launching a content product line that will be irrelevant given the as yet unseen realities of the European broadband market.

“It’s more than just broadband video production,” said ProteinTV’s founder and chairman Will Rowe, “It’s about encompassing a complete range of content offerings as well as service offerings – so that we can offer a package that’s above and beyond those of Atom or DEN – the existing us organizations who really don’t have much in the way of Euro-centric programming.”

Analysts and industry experts agree that simply providing rich content is not in and of itself enough to generate interest in broadband. That sentiment was echoed not just by production companies but by ad agencies as well – and while analysts almost universally say that advertising will provide the money that fuels the next generation of online content, agencies are skeptical of projections of ‘gee-whiz’, highly interactive advertising.

“ItE’s too early to tell what advertising content works well on European broadband,” said David Sable, CEO of Y&R 2.1, Young & Rubicam’s agency to coordinate on-line and off-line marketing services, “and in fact, from our perspective, the technology is irrelevant, the challenge is for us to deliver advertising that’s relevant to the audience.”

Some predictions of interactive advertising, such as sports fans stopping the action to change the attire of the players, seems less a likely final application than, say families home shopping on line, taking interactive tours of the home and checking neighborhood services, commute times and school facilities.

Whichever is more realistic, it’s not happening immediately, and the interactivity is not yet clear. But it’s being watched carefully.

“We’re exploring everything,” said Y&R 2.1’s Sable. “Ad agencies and marketers have to understand that the issue here as everywhere is education and entertainment delivered in an interesting way.”

Looking for new applications of broadband technology, analysts see several areas on the horizon, including private and business video teleconferencing, and especially towards consumer-oriented applications such as software libraries and personal application service providers.

While current access speeds are just too slow to really use remote software applications or effectively download cutting edge software, broadband opens the door to all sorts of new areas for consumers, such as video game rental, downloading CD-ROM-type software or entertainment packages.

In Any Event, The Hardware’s Ready For It
While Alcatel and Ericsson work to bring new ADSL-capable products to market, Nokia has demonstrated a prototype version of its sexy MW111, a SOHO (Small-Office/Home-Office) box that offers a combination highspeed wireless LAN connection with broadband internet access that will be released later this year.

BT’s strategy for BTOpenworld directly addresses the problems that users in Germany and France have had with the complexity of setting up broadband on their PCs and have cut deals with hardware manufacturers including Apple, Hewlett-Packard and IBM to pre-install the service on their new PCs.

Whatever the final device – be it an integrated ‘smart’ television set, WAP device or a souped-up PC – to the European residential user the major problem is that they don’t see a compelling reason to upgrade – early adopters see it, but the masses don’t, and won’t until there’s sufficient compelling content online.

VCs Eye Location-Based Startups

With UMTS license bids in Germany in full swing [2000], there’s tons of hype about the coming of the mobile Internet. Signs are encouraging that the new mobile Internet will in fact allow VCs to look at some rapidly emerging technologies that will indeed change the way Europeans use information.

And right now, the smart money is betting on location services. VCs are saying they’re the coming killer app on the UMTS-powered mobile internet. The character string “m-” is currently as in vogue as was the character string “e-” two years ago. The space is heating up quickly, but there’s room for many.

“We haven’t yet invested in the end-application space, but I’m certainly personally very interested in finding some good, solid business plans in the area,” said Peter Boehringer, Investment Manager at 3I in Munich, which currently invests in location infrastructure company, Cambridge Positioning Systems.

“These are great applications that allow businesses to super-target their marketing and sales to very specific areas without wasting a lot of money. And the user likes it, too, because they get noticed and start getting offered things they really want and can use. Up to now no one’s been able to address this really local market on a broad scale.”

Great. So in the near future, as we’ve all heard, if we’re within five minutes’ walk of a Starbucks, our phone will beep telling us that a) a friend of ours happens to be nearby, and b) if we’d like to get together and have a coffee, we’ll get $1 off a large half-caf-mocca-skim-chocca-no-fat-triple-latte –if we show up in the next ten minutes.

There are two sides to the space, both interesting. There’s infrastructure technology – companies like Cambridge Positioning Systems, which develop the technology that can do the positioning systems and report locations of users. Cambridge’s Cursor system compares the relative times of arrival of signals between base transceiver stations and the actual handset and can thus extrapolate a user’s location within 50 meters or so. Cursor has already undergone trials working with companies including the AA, Vodafone and Maxon.

And then there are other companies, such as iProx that are developing means to use the positioning data for end-commerce applications.

“iProx is a very interesting company,” said Martin Fiennes, Investment Manager at Top Technology Limited, a UK VC firm, “and we’ve indirectly invested in them through Brainspark. Iprox is developing a series of applications and my personal view is that I don’t know which of them will become the killer app, but I’m confident that one or more of them will.” iProx received seed funding of US$1 million in April, and is presently in the middle of an interim round of funding, looking for £3 to £5 million.

“The trick is,” said Ravi Kanodia, Iprox co-founder and Chief Operating Officer, “if you know where the people, stores and places of interest are, then you can be quite clever with the technology, for example by letting people know when their buddies’ phones are in the area without their actually “asking” for it, through our use of intelligent profiling. You have to be capable of following millions of users but you mustn’t send the traffic bandwidth through the roof or require millions of supercomputers to process.”

There are barriers.

First, the technical: telecoms believe that the location data it can provide are the crown jewels in their collection of services, and they’re not only not willing to let those go cheaply, they want to have total control over them. This brings up the issue of just whose data it is – it isn’t the operator’s location, it’s the user’s location, and it could well be argued that the user may indeed own the rights to his location signal.

But it would seem that this first barrier is less of a problem than it might seem: true, different telecoms use different technology, and have in the past refused to share it with their rivals. But companies offering end-use applications will have the opportunity to act as a ‘Switzerland’ – a middle ground interface offering cross-platform services. This has benefits for both telecoms and users: for example, SMS usage became what it is today only after the telecoms allowed it to became a cross platform tool.

“I think that rather than the services being controlled by the operators,” said Sandeep Kapadia, Investment Associate at Prime Technology Ventures in Amsterdam, “what we’ll see is something similar to the web-based portals, and similar to what NTT DoCoMo is currently doing: synergy of multiple applications. There will be hundreds of available applications, from hundreds of companies, and the operators will take a cut.”

Another barrier is, naturally, that this brings up the old privacy bugaboo in a major way. Privacy laws and etiquette varies throughout Europe, and, as 3i’s Boehringer says, “Not everyone wants their movements tracked.”

But VCs agree that solutions to the legal as well as the privacy issues are on the horizon, perhaps as early as this coming autumn. Users probably will be able to selectively give permission to m-marketers to allow them to receive, say, certain types of offers. Or use Iprox’s much touted “buddy system”, which tracks the movements of a group of friends, constantly vigilant for the opportunity to beep any two and tell them they’re in close proximity to one another.

And the legal issues are currently under review throughout Europe as well. It is to the advantage of all parties to come up with a solution to any legal barriers as quickly as possible.

One last thing: this is an entirely Euro-phenom. US-based mobile systems are simply too creaky, too convoluted and frankly to pre-m-historic to even contemplate such a system without major investment. With this technology, Europe clearly leads the way, and things are moving fast – so fast that searching the internet for companies in the space will likely be an unrewarding activity.

“We’re talking about something that’s moving fast,” said 3i’s Boehringer, “way too fast for Internet here.”

Family Radios Keep You In Touch

It’s a holiday nightmare: your child, found tearfully tugging at the skirts of a grinning theme park employee, has ratted you out as the parents that lost him.

As hundreds of university students in air conditioned fur character suits have your description, the net closes in. Goofy’s speaking into his wrist and pointing at you!

Now you’ve got to face dozens at the dreaded Guest Relations, where you collect your wayward child and sheepishly explain that, “I only turned my back for a SECOND!” For families and groups of even two visiting American theme parks or malls, Walkie Talkies on the new US Family Radio Service can be a Godsend.

A new range of inexpensive handheld radios operate on the FRS, a set of US radio frequencies that are available to users without an FCC license. Hand-held CB radios, while powerful, couldn’t provide a traffic-free channel, and carrying a roaring pocket full of “good buddies” through the Magic Kingdom just didn’t seem practical.

So radio manufacturers Motorola and Radio Shack made the FCC a deal: loosen restrictions on the airwaves, and they would produce low-cost walkie talkies that would allow friends and families to communicate. Say, across the wilds of a theme park, shopping mall, park or forest.

The FCC passed the Family Radio Service act in 1995, clearing the way for Motorola, Radio Shack and other manufacturers to produce some of the coolest little handheld radios on the market.

Motorola’s main entry, selling at around US$89 a piece in shops (but listed as $129 by Motorola), is the neon-colored TalkAbout: very colorful and retro-modern looking (think Buck Rogers) two-way radios with a range, they claim, of up to two miles.

Radio Shack’s 2-Way Personal Radio models, which are actually built by Motorola and cost about the same as the TalkAbout, look somewhat more Mission Impossible. They’re clumsily marketed, but the Radio Shack models, along with FRS walkie talkies from companies including Kenwood and Midland, are very good products with just about the same technical specs as the Motorola branded models.

I recently took the Motorola radios on a little trip through Walt Disney World, the Sawgrass Mills Shopping Mall, the Kennedy Space Center and the entire state of Florida, and the Radio Shack radios through Orlando. I’m happy to report that when you’re in the theme parks or on the same floor of a mall, these things are absolutely fantastic.

Plop! One shortcoming was that despite the rugged looking case, the TalkAbout is by no means waterproof. While planning our day poolside, I read with interest the TalkAbout manual, which said, “Water Resistant…” and before I finished reading the sentence I tossed the little yellow box into the pool, expecting it to float.

I have never seen something sink so quickly.

I dived in after it, and when it surfaced, I turned the power switch on. It made the most pathetic electronic noise since R2D2 was deactivated: Beeeeeewooop. After an hour with a newly-bought six-point star socket wrench and a hair dryer, I’m happy to report it worked as good as new.

“Water resistant”, apparently, means it can be rained on lightly. Tempting as it may be, don’t expect the thing to work under water unless it’s in a waterproof plastic bag.

Vowing to use it only as intended, my wife Corinna and I set out for Orlando and the theme parks.

The thing to remember is that the range conditions stated on the box are optimal – as in, optimally you’ll use it at night, at sea level, with clear skies, and in Tahiti.

The actual range we found was just about a mile, which is perfect for, say, the whole family in the same Disney park. Across the Magic Kingdom, we were able to communicate perfectly, making this a natural for parents to let their kids run off with one radio while they keep the other.

We did a range test, with my wife on the monorail to Epcot. We were able to hear each other only for a little while before her comments became just about,

“Im gzzrbth with baazrrrb CRACK Epcot”

But within the parks themselves, the radios functioned absolutely as promised. We even had no interference – our own private channel – despite the sight of about seven or eight other families in the area using their FRS radios.

That’s because all brands of these radios allow you to broadcast subaudible tones which effectively multiply the available channel sets tremendously: there are 14 channels and 38 subtones from which to choose.

The Radio Shack model worked great throughout the Belz discount outlet mall. We had some fading in and out, but could always hear each other.

Since specs are all very similar, your choice is really which one you like best or, more likely, which one’s cheapest at the time you;re shopping for them.

The TalkAbout and TalkAbout Plus, while not water resistant, are certainly rugged, and stood up to drops and bumps. We saw a kid at the Kennedy Space Center kicking his radio and then speaking on it. The manual didn’t mention anything about this but I assume it is not recommended.

The best place to buy the radios – whichever brand you decide on getting – is in the States, where the prices are better than in Europe. They’re sold at many electronics shops, all Radio Shack locations and in ham and commercial two way radio shops. You can also buy them over the internet, and have them delivered to your hotel in the US, saving on international shipping and import duties.

Motorola’s website is Radio Shack’s website is at Midland and Kenwood FRS Radios are available through Northern Mountain,

Clinitrac’s Brick Could Save Pharmaceutical Companies Millions

The development cost of a pharmaceutical drug can easily run between $500 million to $800 million, and clinical trials alone can cost between $1 million and $2 million per day in lost future revenues. So imagine a service that could reduce by a year the time it takes to perform a clinical trial, analyze the results and submit them to the US Food and Drug Administration (FDA).

That’s the dream of Stockholm-based Clinitrac, which has produced a working prototype of its GSM-based wireless solution geared to the problem of initiating, gathering, analyzing and accessing the information generated through medical clinical trials. The time to market is, of course, dependent on loads of factors, but probably refers to larger, longer trials.

VCs Believe
Clinitrac received $3 million in seed funding in May 2000, mainly from BrainHeart Capital and HealthCap, but also netted stakes by the Swedish Industry Fund and others. The company is currently entering a second round with the original funders, to the tune of an additional “three to four times that amount,” and are seeking to bring in an additional, US-based venture partner to the fray.

The company has yet to produce revenues, but its working prototype is impressive. It has already cut a deal with Psion for the Netpad and is in discussions with a major PDA manufacturer. And it has had meetings with US GSM operators to ensure that Clinitrac’s product will have all the GSM network coverage it needs when it offers its product to US markets in 2001.

Patients enter information on a half-brick-sized Psion NetPad, which has a wireless Internet connection, a touch-activated screen and enough shock absorption around its edges to tolerate a month in a New York City public secondary school. The information is then transferred back to the company performing the testing, and made immediately available to doctors, scientists, product managers and developers.

“This sounds like an interesting technology,” said Nick Woolf, biotech analyst for ABN AMRO. “There are other companies in clinical trial services who claim to have various systems – voice recognition systems and others – but it’s certain that real-time information on a clinical study is valuable.”

Clinical Trials Today
The process is, in a word, revolutionary. Today, patients are asked to fill in paper forms, and they often forget, fill them in late or inaccurately. This information is delivered to a doctor after 30 days, which means that a patient who repeatedly misses his noontime dosage or has an adverse reaction to a drug would not be identified until after at least a month.

“The biggest problem with clinical trials,” said Clinitrac CEO Andreas Segerros, “is keeping the patient in the trial. Once they blow the protocol a certain number of times, you need to take them out. Our product would allow monitors to see, on a daily basis, that Mr. Thompson over there keeps missing his 3 p.m. pill, and call him early enough to keep him in the study by making sure he took the drug.”

That indicates a level of involvement and monitoring of tested subjects unheard of today. Currently, paper forms are stacked up from around the world, flown to central data processing facilities and keypunched into systems before anyone can even have an idea of the nature of the data.

The major risk, Woolf said, is getting the product out there and recognized as a clinical trial service. Most large pharmaceutical companies, he said, contract out much of the work of clinical trials to Contract Research Organizations (CROs).

“Today there are CRO subcontractors that do nothing but take dirty paper forms filled in by patients and scan in the results,” said Henrik Linder, Clinitrac’s clinical research operations senior director. “[Our] system gives you clean data, digitally, directly where you need it and in real time. And when we approach the pharmaceutical companies, they’re like, “Finally! Thank you!””

There are potentially several areas in the pharmaceutical industry where a product like this could be used to affect both savings for the end user as well as increased profits for the manufacturers. Traditionally, on approval of a drug, the onus is on the drug companies to appeal to the FDA in order to maintain a high price – the FDA is in effect negotiating on behalf of the American Medicaid system, which will pay or not pay for a drug based on the assessment of the FDA.

The pharmaceutical company will argue that a) the thing took them years and billions of dollars to research, b) it meets an immediate, and heretofore unaddressed, need of the general public, and c) the quality of life improvement, or simply the decrease in necessary medical attention required by a patient taking this drug, is so compelling as to justify a higher dose or daily cost of the drug.

Clinitrac said its product can help in this process as well, by allowing pharmaceutical manufacturers to have access to a broader-than-ever range of quality-of-life questions, or information above and beyond the physical effects of the drug.

For example, in addition to hard medical questions of efficacy to a patient on a clinical trial for a drug that attacks skin rash, they would also be asked questions such as: “In the last week, how often did embarrassment about your condition cause you to make more conservative clothing choices?”

The answers to questions such as these would enable pharmaceutical makers to argue that in addition to straight efficacy, the drug in question has a positive impact on the patient’s quality of life – a compelling argument for a higher price for the drug.

“As a monitoring tool it could be extremely effective,” said ABN AMRO’s Woolf, although he stopped well short of saying that the technology alone would amount to a stronger negotiating position. “Whether you can correlate the monitoring tool to a gain of negotiating points with the FDA, HMOs and other reimbursement agencies would be difficult to claim.”

He added: “These guys need to team up with a Quintiles or a Covance,” referring to two of the larger CROs. “Because those are the ones that already have the relationships and access to clinical hospitals.”

Absolutely true, Clinitrac agreed. For now.

But the company is convinced that eventually pharmaceutical companies will see the savings involved in their real-time offerings, and Clinitrac won’t be keeping many friends in the CRO world for long.