Tej Kohli Business Blog

Better than expected results from a number of top technology names boosted stocks in the early going Friday, but sellers soon took over to send the market sharply lower.

Despite extreme volatility, Wall Street managed to finish the week with small gains in the Dow and S&P and just a 0.6% loss in the Nasdaq, as the Federal Reserve’s biggest emergency rate cut since 1982 saved stocks from much steeper losses.

Microsoft, Sun Microsystems, Juniper Networks and Broadcom were among the names posting better than expected results late Thursday.

All opened sharply higher Friday morning but ended the day mixed, with Microsoft and Juniper lower and Sun and Broadcom posting small gains.

The selling started as the S&P 500 neared the 1370 level, the bottom of a 15-month trading range the index broke down out of last week, as traders began lowering their expectations for more rate cuts when the Federal Reserve meets next week. Expectations are for a one-quarter to one-half point rate cut, less than this week’s three-quarter point emergency rate cut.

E*Trade was a big gainer, up 8% on a restructuring plan, and Microchip Technology and Compuware were higher on their results. InsWeb jumped 29% after finishing its first year of profitability.

Motorola rallied 6% despite an S&P credit rating cut, as the company rebounded from an 18% drubbing earlier this week.

Synaptics, PMC-Sierra and Integrated Devices fell on their results.

The Nasdaq lost 34 to 2336, the S&P fell 21 to 1330, and the Dow tumbled 171 to 12,207. Volume declined to 4.92 billion shares on the NYSE, and 2.65 billion on the Nasdaq. Decliners led by a 19-14 margin on the NYSE, and 16-14 on the Nasdaq. Downside volume was 73% on the NYSE, and 72% on the Nasdaq. New highs-new lows were 21-84 on the NYSE, and 42-114 on the Nasdaq.

Researchers at Indiana University are raising alarms about the potential vulnerability of Wi-Fi networks to malware attacks. In their report, the researchers said they were able to simulate the vulnerability of Wi-Fi networks in several U.S. cities to the spread of malware, the malicious software worm or virus that the study said could spread rapidly from one wireless router to another.

The researchers state most of the simulated attacks show tens of thousands of routers infected in as little time as two weeks, with the majority of the infections occurring in the first 24 to 48 hours.

However, several conditions would have to be met for an attack of such magnitude, chief among them, unprotected routers. Further, the report discusses how such an attack might be quickly contained or the spread of infection reduced.

One way is to force users to change default passwords, which many fail to do. Second is the adoption of Wi-Fi Protected Access (WPA)  the cryptographic protocol meant to replace Wired Equivalent Privacy (WEP) that is more easily broken. WEP’s shortcomings have been widely documented and a major security weakness identified by the university researchers.

Richard Rushing, Chief Security Officer for wireless security vendor AirDefense, said the report is another good reminder that users need to be pro-active because the default settings on many wireless systems are sub-par if not out-of-date. “If you go to any support site for your router, I guarantee you it’ll have an update that’s newer than what you have installed,”

But Rushing thinks the disaster scenario laid out by the Indiana researchers is less of a threat than more traditional virus attacks on computer users in general and wireless networks in particular. He notes there would have to be a significant number of active users with unprotected routers for a virus to spread quickly and software like AirDefense’s own monitoring tools would notice such anomalous behavior right away and issue an alert.

In a more traditional malware attack, an individual unknowingly downloads a Trojan or rogue program that steal passwords, credit card info, etc. Unprotected wireless systems are at risk to these kinds of attacks. Rushing said this is the low hanging fruit for the bad guys since so many users don’t bother to install the right protection.

He noted many vendors are doing a better job of providing better security out of the box than in years past when encryption and other protections had to be proactively enabled, but it’s still user’s responsibility to make sure the latest security is in place.

But networks are very different than PCs in that they are more often left continuously online and thus are a more tempting target for would be attackers. The researchers also assert a large number of users do not change their password from the default established by the router makers. Since these default passwords are easily obtainable, it gives the bad guys easier entry. Again, this is another case where pro-active steps like installing a unique password, would better protect a wireless system.

The past year was full of legal and regulatory messes for Microsoft. Plus, Windows Vista missed the 2006 Christmas rush, and the company was slow to roll out its online services.

But things could be looking up in 2008, at least in some areas for the software giant. However, the company is losing one very important asset in 2008: Bill Gates.

Enter the ‘Oz’ Era

Company co-founder Gates, who fueled the Microsoft vision for the past 32 years and was previously CEO, is retiring from active work at the company, expected by summer, 2008. He’s making the move in order to spend more time working on his family charity, the Bill and Melinda Gates Foundation. (What’s the fun of earning all those billions if you can’t have a little fun giving them away in ways meant to benefit the world, such as funding malaria vaccination campaigns in emerging nations?)

As Microsoft’s largest stockholder, Gates will retain his job as chairman of the board of directors. However, he already relinquished his role as chief software architect (CSA) to former competitor, Ray Ozzie, in 2006. Gates will step away from the company full-time, with the exception of “special projects,” as of July 2008.

What won’t change? The company’s top management. An employee since 1980 and CEO since 2000, Steve Ballmer is the firm’s second-largest stockholder. By all accounts, the company is well managed and will continue to be for the current future.

Meanwhile, Ozzie is nearly as legendary as Gates himself, in terms of his powers as a tech visionary. After all, he fathered probably the most successful product that Gates and company ever had to compete with – Lotus Notes.

Ozzie’s biggest challenge is helping to figure out how the company can survive as a software publisher in a world where it looks increasingly that the future will be in services provided “in the cloud” rather than as big programs installed on users’ PCs.

Like Gates, Ozzie enjoys a reputation as both a brilliant engineer and a savvy businessman. He’s also known as a consummate manager. However, since he took the CSA’s reins, Ozzie has been nearly invisible outside the company. Some observers feel he should take on more of the public role that Gates has played – that of technology visionary and the public face of the company.

Since he became CEO, Ballmer has taken on much of the role as Microsoft’s business figurehead. Whether Ozzie will follow in Gates’ shoes as Microsoft’s “Mister Wizard,” however, is unknown.