More than 400,000 people now work in the state tech industry, according to a new study released by the Technology Alliance at its annual luncheon in Seattle.

The trade group found 396,818 people are directly employed in tech jobs, up 15,272 from its 2010 study.

This year it began tallying self-employed tech workers, which brings the total to 434,343 jobs or 13.6 percent of jobs in the state. The industry's combined payroll is $41 billion, it said in a news release.

Employment counts were based on data from the first half of 2011. The chart below was part of today's presentation.

Applying a multiplier to gauge the industry's broader economic effect, the group's study concluded that the state's tech industries support 1.4 million jobs and nearly $86 billion in payroll, or about 45 percent of the state's employment.

Wages averaged $94,531, compared to $49,829 for other industries, the release said.

The average pay is down significantly from the group's 2010 report, when tech jobs averaged $110,145 versus the stage average of $57,654.

Companies in the industry had $231 billion in sales last year, 76 percent of which were outside of the state.

Alliance chairman, Jeremy Jaech, said the job growth underscores the need for the state to invest more in educating future tech workers. Through 2018 the industry will add 6,900 jobs per year on average but state schools' output will lag that demand by 4,400 positions a year, he said.

"We're not cultivating a sufficiently large home-grown talent pool and this is a bad thing," said Jaech, a UW alum.

Jaech is stepping down as chairman of the group and being replaced by Cheryl Vedoe, chief executive of Apex Learning. During the group's luncheon,

Vedoe introduced the group's annual "Innovation Showcase" company of the year, MobiSante. The manufacturer of cell phone-based medical imaging gear presented its business to a tech alliance showcase in 2010 and received FDA approval for its products in 2011.

The luncheon's main event is an on-stage conversation between F5 Chief Executive John McAdam and UW professor Ed Lazowska.

They discussed how F5 has evolved beyond its first products for balancing network traffic loads. Its technology was initially developed by UW students, and the name was inspired by the move "Twister" and refers to a "force 5" tornado.

Most people don't realize how widely F5 equipment is used to manage networks but if you book an airline tickete online, send a text or do social networking, "there's a high likelihood you've been through an F5 product," McAdam said.

F5 employed 2,800 last quarter and plans to add at least 125 this quarter, he said.

A turning point for the company came in 2002 when it began developing a traffic-management operating system. At the time F5's revenue of $27 million made it appear to be chasing a small market but sales started to "rocket" after the operating system was released in 2005, McAdam said.

Last October, F5 reported that its annual sales had crossed $1 billion.

The company's high market capitalization now gives the company the "luxury" of becoming a bigger independent company, though it also raises expectations for the company's quarterly performance.

"Frankly it's our biggest defense against an acquisition," McAdam said.

McAdam agreed with Jaech's concerns about education and said F5 has to import about 40 percent of its employees into the state.

Here's a chart that Jaech presented, showing the distribution of tech jobs in the state:

Seattle's F5 today reported that its sales crossed the $1 billion a year mark, the highlight of a strong earnings report that boosted the stock on what was otherwise a rough day for tech stocks.

Although overall tech spending is suffering from the uncertain economic conditions, F5 and a few other companies found a niche providing software, hardware and services that big corporations are using to modernize their networks and datacenters.

F5's traffic management and security products have been selling especially well
to phone companies upgrading their networks to handle the flood of data traffic from
mobile devices and video services.

"If you're using social networking, if you're doing online banking or booking an airline ticket or sending a text or trading a stock, there's a real high chance you're using us," John McAdam, company president and chief executive officer, said in an interview.

The company also disclosed that it has been hiring like crazy and plans to continue adding jobs.

It hired about 480 people in its fiscal year ending in September - bringing its headcount to 2,490 - and plans to hire at least 100 more by the end of this year. That includes 155 jobs added over the last year in Washington, where it employs 850 in Seattle and 150 in Spokane.

Shares of the networking hardware maker jumped about 8 percent in after-hours trading to around $96 after the earnings were disclosed. Earlier they'd fallen 5 percent to close during regular trading at $88.76.

(UPDATE: The stock's really moving today - Wednesday morning: it's up 13 percent to $100.30 at last check)

Sales were up 24 percent during its last quarter and 31 percent - to $1.15 billion - during its fiscal year ending Sept. 30. Earnings per share were 84 cents during the quarter and $2.96 for the year, up from 77 cents and $1.86 the previous year.

McAdam said there was strong demand for its new Viprion 2400 and Viprion
4400 chassis. The company also released a major update to its operating system during the quarter.

F5 was incorporated in 1996 and went public in 1999.

Although F5 is expecting seasonal slowdowns in the current quarter, the broad upgrade cycle taking place in corporate computing - with companies using virtualization to consolidate servers and shifting applications to internal and external "cloud" networks -is nowhere near over, McAdam said.

"I think there's at least a five-year run rate on this type of architecture and it could easily be longer," he said.

Meanwhile finding enough of the right people to continue expanding the company will be a challenge for F5, McAdam said, but he expects the company will be able to continuing growing in Seattle and its other locations around the world.

There's also enough room at its headquarters along Elliott Way to accommodate
the growth for a few more years, after which it will probably need to find another location in the city, he said.

To celebrate the $1 billion milestone, there's a company meeting Wednesday at which employees will get cake and t-shirts with a rocketship logo.

Reaching $2 billion in annual sales will take a little longer, but McAdam said next year's growth will be a big step in that direction.

"We reckon we can do at least 20 percent," he said.

The company prepared a graphic timeline of its history to mark the occasion:

Steve Jobs did his old employer one last favor.

By resigning from Apple last week, Jobs made everyone briefly forget that Hewlett-Packard, where he had one of his first jobs, had just hobbled itself.

It may seem like ancient history, but HP's debacle isn't over yet, and the outcome will reshape the tech industry and the lives of tens of thousands of employees across the West.

The world's largest PC maker and cornerstone of Silicon Valley announced Aug. 18 that it was killing its new flagship Web tablet and may jettison its PC business.

Simultaneously, Chief Executive Leo Apotheker (left) doubled down on its higher-margin corporate-technology business, bidding more than $10 billion for a relatively low-profile British enterprise software company.

HP's stock was in the $40s in the spring, the mid-$30s in early summer and then plunged below $25 on the news (see chart). HP lost more than $10 billion in value, and the fabled company may be a takeover target, ready to be sliced and diced.

There's no doubt the PC industry is in a slump, and HP's TouchPad tablet was a dud.

But the PC industry is cyclical, and in past years its growth lifted other parts of HP's business. In the fiscal year that ended last October, HP's personal-systems group -- the unit that sells PCs -- accounted for half the company's net revenue growth.

The group's sales were up 15 percent in fiscal 2010, to $40.7 billion, and its profit grew 5 percent to $2 billion.

Yet, in 2009 and 2010, HP cut the percentage of the group's revenue spent on researching and developing new products.

That's a far cry from the legendary invention factory that gave Jobs a summer job in his teens and served as an early role model for Apple.

What's most striking is that HP has been acting just the way Wall Street encourages tech companies to behave. It's been ruthless on costs, and unsentimental in deciding to slash core businesses and chase products that, for now, have higher margins.

But instead of applauding these bold moves, investors have savaged HP. Ratings agencies raised red flags and several research firms downgraded its stock after the announcement.

Some Wall Street sirens still praised the approach, if not the execution. Credit Suisse's Kulbinder Garcha told The Wall Street Journal that HP had the "correct strategy" in buying the British company, and Gleacher & Co.'s Brian Marshall told the paper, "HP is undergoing a sound strategy transformation by focusing on high-growth, high-margin opportunities."

We may hear more of this in a few weeks when Microsoft holds its annual meeting with financial analysts. They've perennially asked the company to slash costs. In recent years, as Microsoft stock lagged despite the company's steady growth, some began calling on Chief Executive Steve Ballmer to break the company apart.

This would enable investors to choose only the most profitable groups, instead of having to bet broadly on the whole company.

It's a cynical and greedy approach.

Global tech companies that take the long view use proceeds of their hits to develop new products that may take years to crystallize and become profitable. Eventually this broadens their reach into new markets, grows profit and stabilizes companies that employ tens of thousands of people and provide tools the world depends upon.

Multiple businesses balance each other through cycles. Strong Xbox sales made up for slowing Windows sales during Microsoft's last fiscal year.

Instead of laying people off when its core product slowed, Ballmer announced across-the-board compensation increases that take effect in September, because "success comes from the people who work here," he said in an April memo.

Microsoft hasn't charmed Wall Street in years, and Ballmer doesn't seem to bother.

That's one way to deal with Wall Street. Another is Apple's approach, which is to play the Street like a Garageband guitar.

For instance, the day before Jobs resigned, someone told The Wall Street Journal that the iPhone 5 will debut in October on Sprint as well as AT&T and Verizon Wireless. Who would sell Apple stock right before an iPhone launch, Jobs or no Jobs?

Then we have HP's approach. Apotheker is still trying to make his mark, in the footsteps of past HP bosses who cut thousands of jobs and spent heavily on acquisitions to boost growth and woo investors. I'll bet he takes the fall for clumsily attempting to give the queen of the PC industry a quick and dirty makeover.

When it comes to tech companies of a certain age, Wall Street is like a rude old man who presses his wife to get a radical face-lift and boob job because he can't see her beauty and lusts for a young filly.

HP is the latest reminder that you'll never be happy in a relationship like that: It went under the knife and still ended up forlorn, dumped on the curb.

Seattle's Adapx, which produces digital pen technology, announced today that it raised $5 million and now has more than 800 customers

Adapx will use the money to build new products and expand a line of products used by the military for command and control operations. These products help intelligence, surveillance and reconaissance teams input data into digital maps and other systems by sketching on paper or touchscreens or speaking as they sketch on wall displays, the release said.

Altogether the 49-person company has now raised $24 million, including a stake taken by the CIA in 2006.

Venture capitalists are betting that Adapx is getting its stride providing software that enterprise customers use to get notes taken with digital pens into applications such as SharePoint, Office and CRM systems.

Chad Waite, general partner at OVP Venture Partners, said in a release that the company's Capturx line of products has seen "record growth in customers ranging from utilities and oil and gas firms to inspectors and insurance providers."

OVP, Paladin Capital Group and Pelion Venture Partners provided the new funding, upping their previous stake in Adapx.

Seattle communications software company Varolii reached across Lake Washington for its new president and chief executive, hiring David McCann, general manager of Microsoft's Windows Server product management team.

McCann was previously chief executive at Electronic Evidence and CarParts Technologies, and senior vice president at FileNet Software, leading up to its acquisition by IBM in 2006.

"Varolii is at a strategic intersection of cloud computing services and personalized consumer communications, reaching more than 75 million U.S. consumers each year for some of the world's largest corporations," McCann said in a release.

McCann replaces Nicholas Tiliacos, who stepped down after 10 years at the company.

Varolii provides software and services that companies use to deliver automated messages to employees and customers via phone, email, fax or text messages. It has around 250 employees and 450 customers.

Tier 3, a 5-year-old Seattle enterprise software company, today announced its first round of venture funding.

The company is taking $8.5 million from Ignition Capital and Madrona Venture Group, and adding Ignition's John Connors and Madrona's Matt McIlwain to its board.

Tier 3 has about 100 customers in the consulting, online commerce, discovery and software-as-a-service industries, including Microsoft and Slalom Consulting.

Chief Executive Adam Wray said in the release that the company's "uniquely positioned to capitalize on the migration of traditional IT and data center services to the cloud by providing standards based, optimized infrastructure for running mission-critical applications over IP."

Research giant Gartner slashed its influential PC sales forecast today, saying that sales will be much slower than expected in 2011 because of growing interest in smartphones and tablet devices such as the iPad.

Gartner cut its 2011 forecast of PC sales growth to 10.5 percent, down from 15.9 percent. It's expecting 387.8 million units to be sold.

Weakness in China's mobile PC market is a factor, but there's "a general loss in consumer enthusiasm for mobile PCs," Ranjit Atwal, Gartner research director, said in a release.

Mobile PCs were key to the industry's growth over the last five years, with average growth rates approaching 40 percent, but all sorts of devices can now be used to connect wirelessly to the Internet, it noted.

Gartner had thought mobile PC sales would continue to grow as consumers bought their second or third systems but it's now thinking that enthusiasm for alternative devices will "dramatically slow home mobile PC sales," George Shiffler, Gartner research director, said in the release.

Shiffler said, "we now believe that consumers are not only likely to forgo additional mobile PC buys but are also likely to extend the lifetimes of the mobile PCs they retain as they adopt media tablets and other mobile PC alternatives as their primary mobile device."

Gartner's now expecting home mobile PC sales to grow less than 10 percent a year in mature markets from 2011 through 2015.

Some consumers are buying tablets instead of PCs. But the bigger issue is that consumers are holding off PC purchases because they're curious about tablets and waiting to see what's available during the rest of 2011.

Corporate sales of PCs will continue to see double-digit growth in 2011 and 2012 as older PCs are replaced around the world but even in this market, some purchases are being delayed as buyers consider whether to buy tablets instead.

Gartner said mobile PCs have lost their cachet as a fashion accessory and aren't living up to their mobility promise.

"The current 'cool' device is the smartphone, and now PCs will soon have to do battle with media tablets when they are launched in large numbers in the second quarter of 2011," the release said.

"Up to now, the appeal of mobile PCs has been their portability. But mainstream mobile PCs have not shed sufficient weight, and do not offer the all-day battery life, to substantiate their promise of real mobility. These limitations have become all the more apparent with the rapid spread of social networking, which thrives on constant and immediate connections. In short, all-day untethered computing has yet to materialize, and that has exposed the "mobile" PC as merely a transportable PC at best."

So when is Microsoft launching that new, more mobile version of Windows?

Brad Lovering, one of Microsoft's top engineers until he left last year, is heading a new Seattle office for Splunk, according to a report by Mary Jo Foley.

Lovering is now vice president of development platform with the San Francisco-based company, which provides an enterprise IT data management system used by thousands of customers.

During his 24 years at Microsoft, Lovering rose to become one of the company's elite Technical Fellows.

Splunk investors include Bellevue's Ignition Partners, a venture firm led by a number of Microsoft veterans.

UPDATE: Lovering told me he'll be hiring five to 10 developers over the next year to work at Splunk's office, which is going to be in South Lake Union.

Ignition also announced today that Frank Artale is joining the firm as managing director.

Artale worked at Microsoft before joining a series of enterprise startups, including several backed by Ignition. He was chief executive of Consera before it was sold to Hewlett-Packard, and vice president of XenSource before it was sold to Citrix, where he was most recently vice president.

Ignition's release said Artale will focus on core infrastructure, networking and security investments for Ignition Venture Partners IV, a $400 million fund.

In a speech at the University of Washington last night, computer pioneer Carver Mead shared all sorts of anecdotes about early days in the microelectronics industry that led to the PC revolution and today's pocket computers.

Mead - who coined the term Moore's Law - told of having one of his regular dinners with his friend Gordon Moore in 1967 when Moore told him about plans to start Intel.

Mead talked about how he later observed the slow, manual lithography techniques Intel first used to create semiconductors in the 1960s. He then learned a better approach from aerospace companies that were using a computerized approach to produce circuit boards.

Later Mead started a foundry service for researchers to share the cost of manufacturing prototype semiconductors, a program that inspired the UW's new "OpSIS" silicon photonics foundry service. The service will be used by researchers and companies developing chips with lasers that transmit digital signals with light at phenomenal speeds.

Mead spoke at a kickoff event for the OpSIS foundry, which is led by Assistant Professor Michael Hochberg. Hochberg studied at Caltech, where Mead is Gordon and Betty Moore Professor Emeritus of Engineering and Applied Science.

Intel's contributing $250,000 to start OpSIS. Also supporting the effort are the Air Force and BAE Systems, which will produce chips for OpSIS at its semiconductor fabrication facility in Manassas, Va.

Intel Chief Technology Officer Justin Rattner said during the event that OpSIS is "going to train a generation - or several generations - of designers and it's going to catalyze an entire industry to embrace photonics."

Hochberg said OpSIS will produce its first run of chips this summer and should make three or four runs a year going forward.

Researchers can pay for a slice of the production wafer, on which a number of different experimental chips are produced. Instead paying perhaps millions for a full batch of chips, they'll pay $20,000 to $30,000 to have their test chip produced alongside others.

"The idea is to make it accessible for the entire community to make these complex circuits," he said.

Here's a video of Mead's speech, provided by a UW spokeswoman. A professionally produced version will be broadcast later on the UW cable TV channel. In the meantime this one works pretty well as a podcast:

Video streaming by Ustream

It's a day of amazing tech news, from Google and Bing executives publicly taking potshots at each other to Apple turning up the heat on the Kindle and Sony Reader.

But the biggest jaw-dropper for me is a report from Cisco, predicting outrageous growth in mobile data traffic over the next few years.

The networking giant is expecting mobile data traffic to grow 26 fold -- at a compound annual growth rate of 92 percent -- from 2010 to 2015. At that point mobile networks will be carrying 6.3 exabytes per month.

There will be more than 7.1 billion mobile devices connected by 2015 -- close to one per person on the globe.

Mobile network speeds will increase 10-fold, from an average of 215 kilobits per second today to more than 2.2 megabits per second.

Two thirds of this traffic flood will be video -- video traffic will more than double every year from now until 2015.

If you've got a metered smartphone plan, brace yourself.

The average smartphone will generate 1.3 gigabytes of traffic per month in 2015, up 16 times from the curent average of 79 megabytes per month.

Tablets are adding to the network crush. They'll generate 248 petabytes of traffic per month by 2015 -- equivalent to the total amount of mobile traffic in 2010.

But for data consumption, laptops will remain the top of heap. Last year laptops connected to mobile networks generated 22 times more traffic than the average smartphone, averaging 1.7 gigabytes per month. Tablets last year generated an average of 405 megabytes per month and smartphones, 79 MB.

Laptops and smartphones "will continue to generate a disproprorationate amount of traffic, but new device categories such as M2M (machine to machine) and tablets will begin to account for a significant portion of the traffic by 2015," the report said.

Even more shocking: there are 48 million people in the world who own mobile phones, but don't yet have electricity in their homes.

A few charts from the report, including mobile data forecast through 2015, and data forecast by device type:

Here's how much more traffic various devices generate, relative to a basic feature phone:

(Today's column ...)

With all the lingering angst over bailouts for banks and carmakers, you'd think we'd be taking a closer look at stimulus funds for high-tech companies.

Especially since government isn't recovering from the downturn as quickly as industry, especially in Washington state.

Tech companies have turned the corner. They're growing, hiring and reporting record profits.

It seems like a good time to ease up on their tax breaks and shift some of that money to education and science that fuel the industry's future growth.

But just the opposite is happening.

Bellevue enterprise software startup Apptio is announcing today that it's hooked up with Wipro, the Indian tech giant.

Wipro will use Apptio's IT management system with hundreds of customers. In turn, Apptio will use Wipro consulting services to support its product suite.

"By combining Apptio's solution and Wipro's IT 360 framework, our customers can optimize the quality of their IT services, showcase the value IT delivers to the business and reduce costs," Wipro senior vice president, Deepak Jain Sr., said in the release.

It's a non-exclusive arrangement. Apptio's hoping to make similar partnerships with other companies, a spokeswoman said.

Apptio started in November 2007 and now has 105 employees and $37.5 million in funding.

HP decided not to poach any current or former Microsoft executives for its chief executive position.

The company announced that its new boss is Leo Apotheker, formerly chief executive of German enterprise software giant SAP.

It remains to be seen how the change at the world's biggest computer maker will affect relations with Microsoft and HP's large but shrinking presence in the Northwest.

But SAP has been a key partner with Microsoft, which considered buying SAP around six years ago. The two companies ended up working closely together on ways to integrate SAP with Office and other Microsoft business products.

From HP's release:

During Apotheker's more than 20 years at SAP, he was a driving force in making it the largest business software applications company in the world. Apotheker helped develop and implement the most significant changes in SAP history. During his tenure, he transformed R&D and technology platforms and expanded business models and customer segments. Apotheker also helped lead SAP to 18 consecutive quarters of double-digit software revenue growth between 2004 and 2009.

"HP has a powerful mix of businesses, products and services, one of the most innovative cultures in the industry, and an accomplished management team who have played a critical role in its success," Apotheker said in the release. "I am deeply honored to be joining the more than 300,000 dedicated HP employees."

HP also added former Oracle President Ray Lane to its board and made him non-executive chairman.

Oracle's where HP's ousted chief executive, Mark Hurd, landed after he was found to have fudged expense reports covering dates with an actress.

At the least, Apotheker will make make HP's top office more cosmopolitan. His bio:

Apotheker was born in Aachen, Germany on September 18, 1953, and graduated with a BA in Economics and International Relations from Hebrew University, Jerusalem. He is fluent in five languages (English, Dutch, French, German and Hebrew) and was awarded the French Legion d'honneur in 2007 in recognition of his business leadership and contribution to the French economy.

You don't usually look to Intermec for blingy smartphones, but the Everett company's going a new direction with the CS40 handheld it's launching today.

The Windows Mobile 6.5-based device is a high-performance industrial barcode scanner that happens to look a lot like one of the newer BlackBerry smartphones. It also has a 3 megapixel camera and "3.75G" voice and data communications.

But the biggest difference is the heavy-duty construction, which makes the CS40 sort of like an armor plated BMW.

Intermec's calling it the "first rugged mobile computer with the size and styling of a smartphone." It claims the device is sealed against dust and liquid intrusion and can withstand multiple four-foot drops onto concrete on all corners and sides.

That blend of durability and design is Intermec's pitch to business customers who might be considering less-rugged consumer devices with scanning apps.

Intermec's release says the CS40 "enables an all-encompassing business process transformation for mobile workforces in pre-sales, merchandising, field service, long haul and truck load transportation."

For a list price of $1,795 in the U.S.

Maybe they should also make a lower-priced one without a scanner, for people who tend to drop their pricey smartphones a lot ...

Six years after it was founded by a group of telecom veterans, Seattle-based Cequint was sold to TNS, a Reston, Va.-based enterprise data services provider.

Cequint provides carrier-grade caller ID products and services to mobile phone companies. It's expected to add $2 million in revenue to TNS earnings through the end of 2010.

The purchase was $50 million -- $46.7 million in cash plus about $3.3 million in TNS stock for Cequint executives. Another $62.5 million in cash will be paid if performance targets are met, for a potential total of $112.5 million.

A spokesman said all of Cequint's nearly 70 employees will keep their jobs and the company will remain based in Seattle, operating as a TNS subsidiary.

More than 30 million phones have been distributed with Cequint's first product, City ID, which displays the city and state of incoming numbers. The release said the company's moving to a new version that also delivers the caller's name and other features.

Here's a new way to get a plum job in the software business: Fly a company founder to space and back, twice.

That's how Eric Anderson, co-founder and chairman of Virginia-based space tourism company Space Adventures, got to know software pioneer and Microsoft veteran Charles Simonyi.

Anderson's venture flew Simonyi to the International Space Station in 2007 and 2009.

Today Simonyi announced that he's hired Anderson (pictured) as president of Intentional Software, a Bellevue company that Simonyi started in 2002. Intentional is developing a new approach to developing software that presents the designer's intent in the code.

Intentional's release said Anderson, "who pioneered and was the first to monetize the business of human spaceflight, has responsibility for bringing Intentional's transformative technology to the worldwide marketplace."

Simonyi said in the release that Anderson is "one of very few who can take futuristic ideas and make them real." The rest of his quote:

"I founded Intentional Software with the idea of transforming the way software is built and knowledge is used, by allowing the true intentions of today's knowledge workers and business experts to be precisely expressed in the software they need. This remains an audacious goal, and the magnitude of its difficulty is exceeded only by its importance to the future. Software as we know it is the bottleneck in the digital horn of plenty. With Eric joining me in our business, I am confident that Intentional will unstop the bottleneck and change the world."

Anderson, 36, graduated magna cum laude from the University of Virginia with degrees in aerospace engineering and computer science. He was named a 2010 Ernst & Young "entrepreneur of the year."

He's moving from Virginia to the Seattle area, where he'll be leading about 20 employees at Intentional.

Seattle enterprise software vendor Apptio raised a whopping $16.5 million in a third round of funding that positions the company to pursue a public offering next.

Apptio will use the funding to push into new markets and generally grow its business. It plans to add 30 employees by the end of the year, after hiring 30 since January. It currently has 85 employees.

The series C round brings Apptio's funding to $37.5 million. The round was led by Shasta Ventures, with participation from current Apptio investors, including Andreesen Horowitz, Greylock Partners and Madrona Venture Group.

Apptio makes tools that enterprise technology managers use to monitor, analyze and report on their operations and spending.

In its funding announcement, Apptio said it has seen a 300 percent increase in bookings year-over-year, doubling the number of Fortune 1000 companies using its products. Customers include Alaska Airlines, Blue Cross Blue Shield, BNP Paribas, Cisco, Expedia, Hallmark, Starbucks and JPMorgan Chase.

"We are operating with a very strong cash position, but still received high interest from outside investors which ultimately influenced the timing of this financing round," Sunny Gupta, co-founder, president and chief executive, said in the release.

A spokeswoman said the company has no specific plans for an IPO at this time, but provided the following statement:

We do not anticipate taking another round of funding. We are managing the company in a way that builds shareholder value. Given our belief in the market opportunity and the capital we have to fund our growth, we believe we have a good shot at a very successful IPO.

Apptio could also become a target for acquisition by one of the major enterprise software companies building up their portfolios. Gupta sold his previous startup, iConclude, in 2007 for $60 million.

It's hard to focus when the sun's finally shining in Seattle, but we have to pay attention to the Mark Hurd story.

Hurd's the guy who grabbed a Perrier and leapt from Hewlett-Packard's cockpit, riding a golden parachute into history.

(The top of today's column on HP and the Mark Hurd debacle.)

In this age of thrift, Silicon Valley's chief executives are finding a new way to cut costs -- by handling public relations directly.

First we had Steve Jobs telling people to hold their iPhones differently.

Now Oracle's Larry Ellison is on the offensive, offering guidance to reporters writing about his pal Mark Hurd's debacle.

Ellison sent this fireball to Fortune's Philip Elmer-DeWitt today, with the subject line "Hey Jerk."

Adelyn Lee went to jail for a year for falsely accusing me of sexual harassment. Why did you leave that out of your story you scum bag? Let me guess ... your job is telling half-truths. Fortune Magazine must be very proud of you.

Who needs Fortune when you've got your own, right?

Hewlett-Packard Chief Executive Mark Hurd's stepping down after a sexual harassment investigation found he violated HP "standards of business conduct."

I wonder if the folks in Redmond saw it coming.

Hewlett-Packard was Microsoft's longtime partner. HP's website says their "partnership is one of the oldest of its kind in the industry."

But lately HP's been stepping out - first with the comely Finn, Linux, and then going all the way with its Silicon Valley neighbor, Palm.

I wonder if HP's search committee might still consider any Microsoft executives as a replacement for Hurd. Bob Muglia perhaps? Kevin Turner?

A California buyout company is acquiring Daptiv, a Seattle company that provides project and portfolio management software and services. Terms of the deal with Parallax Capital Partners of Laguna Hills, Calif., weren't disclosed.

A spokeswoman said all Daptiv employees will be retained except for Chief Executive Mark Klebanoff, who is being replaced by John Baldwin, a Parallax partner and executive at Artemis International.

Daptiv survived several cycles of the tech industry - and a few major layoffs - since it was founded in 1997 as eProject. The company now has around 90 employees, $20 million in annual sales and more than 500 enterprise customers.

Nintendo of America announced today that it has hired Ingvar Petursson as senior vice president of information services to "spearhead the modernization of the company's internal information systems."

Petursson was previously Expedia's CIO and before that worked in the IT departments of AT&T Wireless, Corbis and The Regence Group. TechFlash noted his resignation from Expedia on Tuesday. The Nintendo job is a new position.

Nintendo is starting a multi-year project modernizing its systems. It follows the recent completion of its new Redmond headquarters.

A group of engineers who helped create Amazon.com's Elastic Compute Cloud service announced plans today to build a new cloud operating system that could compete with offerings from Microsoft and IBM.

Their company, Nimbula, is based in Menlo Park, Calif.. It has 17 employees and $5.75 million in funding from Sequoia Capital and VMWare.

Chris Pinkham, co-founder and chief executive (below), said Nimbula doesn't compete with his former employer and will actually be "an on ramp for EC2."

"We don't think this is directly competitive," he said. "We think this is complementary.''

Nimbula is developing software that runs within a company's network and directs where applications are run -- in-house or on various cloud services -- based on policies created by administrators. It's installed on top of an open-source hypervisor, and pitched as a way for companies to maintain the security of their information while taking advantage of cloud computing where appropriate.

The software is being tested by a set of unidentified companies in the finance, technology and healthcare fields. A beta version launches next quarter and it will be generally available in Q4.

Pinkham was vice president of Amazon's global infrastructure before managing development of EC2. To be closer to family, he left Seattle in 2005 for his native Cape Town, South Africa, where he set up an Amazon engineering office. He left the company in 2006, shortly before EC2 launched, and then started Nimbula in 2009.

Co-founder Willem van Biljon worked on EC2 product management and marketing. Nimbula's sales vice president, Martin Buhr, previously did EC2 business development and sales and before that worked at Microsoft.

"As the team leaders behind EC2, no one has a greater understanding of this emerging architecture and how to adapt it to enable large organizations to fully benefit from the co-existence of public and private cloud services," Sequoia general partner Roelof Botha said in a release.

Perhaps Botha's also enthusiastic because he, Pinkham and van Biljon all graduated from the University of Cape Town -- as did VMWare Chief Executive Paul Maritz.

An update on Vertafore: In yesterday's item about the Bothell company selling for $1.4 billion, I quoted a spokeswoman saying that the sale won't result in any layoffs.

It turns out there were layoffs at the company this week - on Wednesday, the day before the sale.

The company let go 30 people in its software development group, including one who was understandably peeved by the "no layoffs" comment in my story.

Christy Marble, Vertafore's vice president of marketing, confirmed the 30 layoffs but said they were not the result of the company's sale to TPG Capital.

"There are no layoffs as a result of yesterday's announcement. However we did recently restructure our development team," she said.

Marble said the company's simultaneously recruiting 50 more people this year.

"We're actively recruiting developers with different skill sets than those and we're continuing to grow our development area," she said.

A quiet giant in Seattle's software industry, Bothell insurance software provider Vertafore, announced today that it was sold for $1.4 billion to investment funds managed by TPG Capital.

TPG is acquiring the company from Hellman & Friedman and JMI Equity, private equity firms that bought the company in 2004.

It's quite a show of faith in Seattle for Fort Worth-based TPG. The buyout firm lost almost the same amount of money here - $1.3 billion - two years ago when Washington Mutual collapsed.

Vertafore Chief Executive Euan Menzies said in the release that "We believe this will be an excellent partnership as we collaborate to build future successes and continue our strong customer focus."

Vertafore provides software and services to insurance agents, brokers, carriers nad reinsurers. It claims more than 17,000 customers and 500,000 users. It started in 1969 and combined with a former Safeco unit in 1996.

The company employs 1,140 people. Asked if any layoffs will result from the change, spokeswoman Linda Caudle said "There's no plans for that at all."

"We do not expect any change in the strategy, direction or management as a result of this change," she said.

(Update: It turns out there were some layoffs, the day before the sale. The company said they were unrelated to the deal.)

Seattle's funkiest tech conference may be the Fremont/Ballard Tech Fair hosted by NautilusNet today.

About 150 people are expected at the shindig that starts at 11:30 with "shameless self promotions and introductions."

Presentations follow on topics such as LeftHand iSCSI Solutions, "greening your datacenter" and SAN storage virtualization.

But the big draw may be the free hot dogs provided by Dante. Details are here.

How do you wow the crowd of uber geeks gathered in Seattle this week for the Society for Industrial and Applied Mathematics conference on parallel processing for scientific computing?

IBM's trying with a new algorithm for processing the enormous pools of data the world's generating nowadays, drowning scientists and their supercomputers.

The company says the formula developed by its Zurich-based researcher Costa Bekas reduces the complexity and cost of analyzing huge datasets by two orders of magnitude.

From the announcement:

"The new method was tested on the fourth largest supercomputer in the world and what would normally have taken a day, was crunched in 20 minutes. In terms of energy savings, the analysis required 700 kilowatts total, compared with 52800 kilowatts total."

Testing was done on a Blue Gene/P system in Germany. The setup accurately validated 9 terabytes of data in less than 20 minutes, a process that would ordinarily take more than a day.

Bekas is presenting his findings this afternoon at the conference at the Grand Hyatt.

Here's a clever picture IBM provided of Bekas writing part of the algorithm on glass:

Many tech companies are emerging from the downturn in better shape than before, but the turnaround for Seattle's Isilon Systems is striking.

The storage-system manufacturer Thursday is reporting its first profitable quarter - by a hair - and record sales of $37.5 million, up 18 percent from the same period last year. It's reporting a profit of $140,000, after losing $4.3 million a year ago.

Whether the profitability continues remains to be seen, but founder and Chief Executive Sujal Patel characterized the quarter as a turning point for the company he started after leaving RealNetworks in 2001.

"For us this is a pretty significant step because it really leaves 2009, a year where we were playing defense, behind and sets us up to play offense in 2010 and really grow this business aggressively," he said.

Isilon went from Wall Street darling and the state's largest IPO in 2006 to an outcast of sorts after it missed projections, fumbled its expansion and was accused by the SEC of inflating sales reports.

It's been awhile since we've heard about Starbucks working with Apple, but the coffee giant today is releasing two iPhone apps, including a mobile payment system it's testing in Seattle and Silicon Valley.

The first app, "myStarbucks," is a locator that shows where you can find a Starbucks in case there isn't one across the street. It displays information such as whether a particular store has a drive-through, hot food or a Clover coffee machine. It can also be used to store and share favorite drinks and other items and check drinks' nutritional details.

The second app, "Starbucks Card Mobile," brings the chain's payment card to the iPhone and iPod touch. You can add money to your card account from the app, and spend it at Starbucks stores by rendering a 2-D barcode on the device's screen.

Other apps are available to locate coffee shops and even display barcodes on mobile devices, but the Starbucks brand and promotions will probably drive a lot of downloads.

Both apps are free, and, no, you can't use either one to order ahead and jump the line for a finished, pre-paid beverage.

A spokeswoman said the company looked at pre-ordering with the apps, but it's difficult to be sure the timing will be just right, and that customers don't arrive to find a cold, stale beverage sitting on the counter waiting for them.

Here's the list of stores testing the "Starbucks Card Mobile" payment trial. In Seattle, they are at Key Tower, Columbia Center, 1st Interstate / Wells Fargo, 40th Floor Columbia Tower; Seventh & Stewart; Seventh & Pike; University Village II; and Madison Park.

The California stores include:

20520 Stevens Creek Blvd., Cupertino
5180 Stevens Creek Blvd., San Jose
1037-C El Monte Ave., Mountain View
Shoreline & Pear, Mountain View
Castro @ High School, Mountain View
Miramonte & Cuesta, Mountain View
Charleston & Independence, Mountain View
1687 Hollenbeck Ave., Sunnyvale

Mary Jo has the headline -- "Pigs do fly" -- that captures Microsoft's contribution of 20,000 lines of code to the Linux kernel community.

The contribution was announced today at the OSCON open-source conference in San Jose, Calif.

It's the latest effort by Microsoft to present itself as enlightened and respectful toward the nemesis used by many of its enterprise customers, while at the same time making Microsoft's virtualization software more valuable to them.

Here's how Tom Hanrahan, director of Microsoft's Open Source Technology Center, described it in prepared press material:

Today we're releasing Linux device driver code to the Linux kernel community. This is a significant milestone because it's the first time we've released code directly to the Linux community. Additionally significant is that we are releasing the code under the GPLv2 license, which is the Linux community's preferred license.

Our initial goal in developing the code was to enable Linux to run as a virtual machine on top of Hyper-V, Microsoft's hypervisor and implementation of virtualization.

The Linux device drivers we are releasing are designed so Linux can run in enlightened mode, giving it the same optimized synthetic devices as a Windows virtual machine running on top of Hyper-V. Without this driver code, Linux can run on top of Windows, but without the same high performance levels. We worked very closely with the Hyper-V team at Microsoft to make that happen.

Security guru Bruce Schneier finished yawning and wrote a nice little essay on last week's hullabaloo over North Korean cyberattacks:

Where were you when North Korea attacked America? Did you feel the fury of North Korea's armies? Were you fearful for your country? Or did your resolve strengthen, knowing that we would defend our homeland bravely and valiantly?

My guess is that you didn't even notice, that -- if you didn't open a newspaper or read a news website -- you had no idea anything was happening. Sure, a few government websites were knocked out, but that's not alarming or even uncommon. Other government websites were attacked but defended themselves, the sort of thing that happens all the time. If this is what an international cyberattack looks like, it hardly seems worth worrying about at all.

Schneier said the solution is obvious and old news: Keep computers patched and follow basic security practices. He said last week's incident was probably "kids playing politics" and turned out to be "a sloppily modified five-year-old worm that no modern network should still be vulnerable to."

Enough of the hype and the bluster. The news isn't the attacks, but that some networks had security lousy enough to be vulnerable to them.

Forrester Research dramatically adjusted its forecast for IT spending in 2009, saying it now expects a 10.6 percent decline instead of the 3 percent drop it predicted at the start of the year.

That's for the globe. In the U.S., Forrester expects a 5.1 percent decline, down from the 3.1 percent it predicted at the start of the year.

But don't fret - it's only a "temporary pause," the Cambridge, Mass.-based research giant said.

Spending on technology should pick up in the fourth quarter in the U.S. - which syncs with Wall Street starting to talk about MSFT hitting $30 again - and recover in Europe and Asia in the first half of 2010, the firm said.

The press release quote from Andrew Bartels, Forrester vice president and principal analyst:

"While Q1 2009 saw a scary drop in purchases in the US tech market, ironically that is good news for the long run and we expect to see a stronger rebound sooner. The big drops are not precursors to further declines; rather, we think they are evidence of a temporary pause in US tech purchases, which we expect to start recovering in Q4 as businesses realize that they overreacted in the first quarter."

Breaking down the global decline, Forrester expects computer equipment sales to fall by 13.5 percent this year; communications equipment spending will fall 12.4 percent; software spending will fall 8.2 percent; and IT consulting and outsourcing will fall 8.6 percent.

After spending five years and billions on development -- including early research at the University of Washington -- IBM today announced its enterprise cloud computing services.

IBM is starting with three offerings that further stretch the definition of cloud computing, a term loosely applied to big, scalable computing systems accessed on demand via the Internet.

Now IBM is offering to install "private clouds" for companies in-house, behind their firewalls.

One version is a "test cloud" that enables companies to develop and test applications in-house, instead of renting time from companies such as Amazon.com, Microsoft or even startups such as Seattle's Skytap.

IBM is also offering a bundle of development and test tools that can be used on IBM's cloud -- a network running on 13 datacenters located around the globe.

Or companies may now order a turnkey cloud computing system from IBM, called "CloudBurst." It's a 42-unit server cabinet that comes preloaded with hardware, storage, virtualization, networking and service management software.

(Here's IBM Innovation Systems Engineer James Thoensen with a CloudBurst prototype -- Cloud in a Box? -- in an IBM-supplied image)

Some customers would prefer a more tailored, integrated cloud setup than a "smorgasboard of different siloed systems,'' said Dennis Quan, IBM's director of autonomic computing development in Raleigh, N.C..

"You have bunch of systems that co-exist in datacenters, but they don't act like a system, a single system, and enterprises spend a lot of time having to integrate the different software systems together,'' he said.

There's also going to be a need for more "fit to purpose" clouds, especially if datacenters are strained by the flood of new data. Some 15 petabytes (15 quadrillion bytes) of information are being created daily -- mostly by consumers -- but companies are responsible for maintaining 85 percent of it, according to IBM.

Blueprints for IBM's cloud offerings came from a joint research project with Google. It initially explored business intelligence at big schools and large-scale analytics, and led to the creation of a cloud computing cluster at the UW and two run by IBM in 2007.

"The work that was done as part of that project really informed how we can put together large cloud datacenters that can efficiently process terabytes, petabytes, of information across thousands of machines,'' he said.

The early clusters also "kind of provide the bluepints for the designs we base these new clouds on,'' he said.

What's crucial is the service management systems that make the cloud systems work -- Quan said it's like the orchestra conductor, or "an operating system for the 21st century datacenter."

Here's an edited excerpt from the interview with Quan:

Bangalore-based outsourcing giant Infosys is hiring - in Bellevue.

Great analysis of Oracle+Sun by Charles Fitzgerald, who has a particularly good radar on this topic.

Until early 2008 he was Microsoft's former general manager of platform strategy -- playing industrial chess with Sun, Oracle and IBM.

Fitzgerald predicts Oracle will fob Sun's hardware business off to a company like Hewlett-Packard or Fujitsu.

His take on IBM:

"They got a good look at Sun, but in the end I suspect they're going to regret not doing this deal. They regretted giving Microsoft control of the software crown jewels for the PC; they may face similar situation now on the server. Oracle can have a lot of fun making IBM choose between open systems sanctimony and controlling their own destiny."

After landing more than 500 government and enterprise customers over the last 18 months, Seattle-based Adapx was able to raise another $9 million to expand its business.

The company produces a digital pen that's used with specially printed forms to capture and upload writing and text input done with the system. Customers include Holland America, NASA and the Port of Seattle.

Salt Lake City-based UV Partners led the series B financing announced today, joining previous investors OVP Venture Partners and Paladin Capital Group. It received $10 million in venture funding in late 2007, plus a strategic investment last July from In-Q-Tel, an investment firm affiliated with the CIA.

UV Partners' general partner, Jim Dreyfous, is joining the Adapx board.

"The vast majority of field workers still rely on paper for collecting and sharing information, avoiding the expense and complexity of mobile computers and PDAs," he said in the funding announcement release. "Today's leaner workforces are facing increased pressure to improve productivity. Teams participating in new infrastructure projects funded by the economic stimulus plan are preparing for greater amounts of paperwork and accountability. Adapx is uniquely positioned to grow with those trends and we're looking forward to fueling their expansion."

Cheaper computers are the hottest part of the market nowadays, and Cray's not going to miss the trend.

The Seattle supercomputer maker today announced a lower priced version of its petascale XT5 mega super duper computer, aimed at penny pinching researchers in government, academia and business. Maybe now Melinda will finally let Bill get an XT5 for the rec room.

Starting at $500,000, the "midrange" XT5m runs a version of Cray's SeaStar network designed for systems with peak performance less than 100 teraflops. It comes in up to six cabinets filled with quad-core AMD Opteron processors and a SeaStar-based 2D torus interconnect.

(If that's still too much, there's always the starter supercomputer that Cray introduced last fall - the CX1, starting at $25,000 and holding up to 16 Intel Xeon processors.)

Paris-based ESI Group has been using an XT5m to simulate car crashes.

"Thanks to our new parallel paradigm design, we can confirm excellent scalability up to 1024 CPU cores investigating a 2-million elements size car-to-car crash scenario. The computation time was brought down to 25 minutes including domain decomposition and result file merging,'' ESI crash and safety technical director, Raymond Ni, said in the release.

If today's supercomputers are tomorrow's PC, this may be your grandchild's Xbox.

Apparently there's still financing to be had - if you're a promising cloud-computing startup with more than 50 customers.

That's the case with Skytap, a Pioneer Square company commercializing University of Washington research. Today it's announcing that it received $7 million in its second round of funding, adding to $6 million raised in 2007.

Adding to the pot are Madrona Venture Group, Ignition Partners and Washington Research Foundation.

Skytap provides cloud-based "virtual labs" for software projects, using an on-demand, pay-as-you-go approach.

Chief Executive Scott Roza said the company should grow to more than 30 people by the end of the year, up from about 20 now.

It's not as easy as you'd think to hire good people in the current environment, Roza said, explaining top candidates leaving startups are still finding good jobs and those at big companies are reluctant to give up their job security.

"People always say this has got to be a great mraket to hire in,'' he said. "I actually believe it's a challenging market still to hire in."

Roza said the new funding is evidence that Skytap is among the startups that venture investors have deemed likely to succeed.

"We're all very bullish about our prospects, our ability to create more capital and create more value with that,'' he said.

In the funding announcement, Madrona Managing Director Matt McIlwain said "Skytap has a compelling offering that is well positioned in a growing, high potential market."

Ignition partner Brad Silverberg concurred.

"Since Skytap has been in the market they have met or exceeded every customer, bookings and revenue goal and they are off to a great start in 2009,'' he said in the release.

Azaleos, a Seattle-based company that runs Exchange and BlackBerry messenging services for corporate customers, is announcing a big merger today.

The company's combining with M3 Technology Group in Charlotte, North Carolina.

Headquarters for the combined company will be in Seattle, led by Azaleos Chief Executive Phil Van Etten.

Financial details weren't disclosed. A spokesman said the deal won't result in layoffs among the companies' 125 employees, about 60 percent of whom are based in Seattle.

Bothell-based Winshuttle, which provides data entry and download tools for SAP users, named Lewis Carpenter its new chief executive officer.

Carpenter, formerly president and chief operating officer, succeeds Winsuttle co-founder Vikram Chalana, who is becoming chief technology officer and remains chairman.

Earlier, Carpenter was chief operating officer at Aventail and before that, a senior executive at FileNet.

Winshuttle also reported impressive growth for 2008: Sales doubled over 2007, including a 34 perent gain from the third to fourth quarter, when it closed 215 deals and added 38 new accounts. It also established a Paris office with the acquisition of data-management tools distributor ADAR.

Spring Wireless, a Brazlian company that manages wireless services for companies, today announced that it has hired several former Microsoft executives who are opening Spring's U.S. headquarters in Seattle.

A downbeat new research note from Goldman Sachs said software companies' performance may be similar to the 2001-2002 downturn.

Analyst Sarah Friar didn't mention Microsoft in the note to investors, but lowered her estimates for covered enterprise software companies below the average among other Wall Street analysts, saying, "we believe Street consensus estimates remain too high in software."

"Given the likelihood of economic contraction in 2009, we continue to seek to take a proactive approach to reducing our estimates to more of a 'downside' scenario for next year in order to establish a dependable baseline from which we can better evaluate investment opportunities.We believe Street estimates for software remain too high While it is difficult to forecast for the out-year given the massive uncertainties facing today's marketplace, a look at software company performance in the prior economic downturn (2001-2002) offers some high-level direction .... We believe license revenue declines in 2009 are a possibility and, in many cases, likely, while maintenance growth should decelerate but remain relatively resilient. The net result is likely to be flattish to modest total revenue growth (i.e., low to mid-single digits) for the average mature software company in CY2009. We believe Street consensus estimates remain too high -- post our latest estimate revisions, we stand significantly below the Street at 6% earnings growth in CY2009, down from 8% prior, and below the Street at 10%."

She didn't analyze Microsoft in the note, but lowered her forecast for Oracle.

The real reason Salesforce.com Chief Executive Marc Benioff was in Seattle today wasn't to pitch his company's new development platform.

It turned out he and co-founder Parker Harris wanted to catch the Neil Young concert here Tuesday night, so they decided to stay over and update local journalists on the company's progress.

In particular, they wanted to highlight Visualforce, an interface development tool first unveiled at a developer conference in September.

"Think of it as Visual Basic as a service,'' Benioff said.

Pacific Northwest National Laboratory today announced the purchase of a $24 million Hewlett-Packard supercomputer for its Environmental Molecular Sciences Laboratory, just a week after buying a Cray XMT system.

While most people are still in the process of moving to dual-core computers or waiting for quad-core prices to drop, the the lab took the plunge on an HP system with 18,480 cores.

After it's installed next year, the system will be used for research in areas such as "aerosol formation, bioremediation, catalysis, climate change, hydrogen storage and subsurface science" to support the U.S. Department of Energy.

The HP system, which is replacing a 2003 system from HP, will be the lab's biggest and fastest computer. It will also be available as a resource for outside scientists.

Specs from the release:

The supercomputer architecture runs on HP ProLiant servers and includes an InfiniBand 4x DDR interconnect, 4,620 AMD Opteron processors, 37 terabytes of memory and aggregate disk bandwidth of about 950 gigabytes per second enabled by nearly 21,000 disk drives in HP enterprise virtual arrays. Consisting of 18,480 2.2 gigahertz AMD Opteron processor cores, the new HP supercomputer will have an expected total peak performance of about 163 teraflops.

It's due to arrive in January and be ready to roll in September. Scientists wanting to tap its power will need to submit proposals and go through a competitive peer-review process.

Gartner, the big research firm, said companies shouldn't change their organizational strategy just because IBM announced Symphony, its version of the Open Office bundle that's been around for a while:

"It may seem that IBM has made a bold move into a market dominated by MS. However, the Symphony release is not as significant as it may seem."

The report, issued Monday, said companies haven't widely adopted Open Office because Microsoft continues to support their versions of Office. Also, Open Office's compatibility with Microsoft Office isn't perfect, so they have to continue running at least some copies of the Microsoft product.

Its bottom-line advice: Evaluate Open Office and decide if it's appropriate for some users and analyze migration costs, but don't expect to replace Microsoft Office for all users.

Some companies may appreciate IBM's backing of the open product, and that could also make it more available to government organizations. But there are bigger challenges to Microsoft, the firm said:

"Meanwhile, competitors are not standing still. In the long term, we believe Web 2.0 applications that provide easier deployment and real-time collaboration could be more of a threat to MS Office."

There's a fascinating inside baseball story in ComputerWorld analyzing IBM's move and internal challenges that have held back OpenOffice.

One source in the story speculates that IBM's arrival could make the free productivity suite a serious contender by 2010:

With IBM "betting big on OpenOffice, in two and a half years we could be looking at another Mozilla situation, where Firefox has 15 percent of the market. That could lead to Microsoft modifying Office or changing its licensing or prices, which benefits the entire market."

Renton application provider Etelos appears to be picking up steam.

The company brought in a former investment banker to be its chief executive and opened a branch office in Silicon Valley.

Jeffrey Garon, formerly managing director at Kaufman Bros., is now president and chief executive officer, the company announced yesterday. Earlier he was CFO at Debtor Tripath Technology, Silicon Storage and Monster Cable Products.

Etelos also hired four new vice presidents, and founder Danny Kolke shifted over to become chairman and chief technology officer.

The announcement also noted that in the past six months, the company grew to more than 6,000 accounts representing 36,500 users of its applications.

Are they serving crow in the Sun Microsystems cafeteria today?

The company announced it will sell and support servers pre-installed with Windows, the software its former chief executive famously and repeatedly called a "hairball."

Now Sun's joined the roster of Microsoft OEM partners.

Today's deal was presented as an expansion of the "strategic alliance" formed three years ago, when Sun settled its antitrust claim against Microsoft. They also agreed to make sure their systems work well with each other when virtualized.

Sun must need Microsoft to compete better against Dell and Hewlett-Packard.

Hewlett-Packard has had people in Redmond forever, working with Microsoft on things like drivers.

With the acquisition of Opsware today, it's also a pretty big software company in Redmond.

Opsware acquired a 40-person team in Redmond when it acquired Rendition Networks in 2004. Then it added another 45 when it bought iConclude in March.

Opsware has four years left on its lease of a 12,000 square-foot facility in the Willows Road area, according to its 2006 annual report.

I've asked HP for details on its Redmond plans and will update when I hear back from them.

UPDATE: HP isn't saying yet what will happen to the Redmond office, or how many people it employs in the area.

"The future plans for the Redmond site has not yet been determined at this time,'' spokeswoman Jean Kondo said via email.

Business intelligence has risen to the top of CIO shopping lists but it's a complicated situation, Goldman Sachs said in a report today. An excerpt:

"Though business intelligence purchases remain a high priority, we are also cognizant that we may currently be in a period of peak interest -- and thus that the demand in the future may decelerate from here."

Yet it expects "brisk" consolidation in the BI sector "in the coming quarters and years" as BI vendors buy additional technology, companies consolidate market share and BI vendors are acquired by applications and infrastructure vendors.

Microsoft is positioned to take advantage of the mid-market segmen, which has the biggest growth potential, the firm said. It's going after the category with Office as the interface and three server products: SQL, SharePoint and the new PerformancePoint.

Bigger software companies are also looking for recurring revenue streams in acquisition targets they want to "strip mine," the report said:

Recent acquisitions in the software sector have brought recurring maintenance revenue stream into focus in assessing the strip-mining value of a company. We would expect to see further consolidation in the software sector and believe that potential acquirers are likely to remain focused on recurring revenue as a means to help evaluate/finance these acquisitions.

The firm expects the overall software industry to grow 7.7 percent. Here's its outlook on other categories, which referenced IDC research:

• System infrastructure software accounts for 35 percent of total software spending and we forecast growth of 9 percent to $101 billion by 2010.
• Enterprise applications revenue accounts for 31 percent of total software spending and is forecast to grow to $101 billion in 2010, implying a compounded annual growth rate of 6.2 percent.
• Application development and deployment revenue accounts for 14 percent of total software spending and is forecast to grow to $41 billion in 2010 implying a compounded growth of 7.4 percent.
• Desktop applications revenue accounts for 12 percent of total software spending and is forecast to grow to $38 billion in 2010, implying a compounded growth of 9.4 percent.
• At $18 billion in 2005, database is expected to grow to $24 billion in 2010 with a 6.6 percent compounded growth and thus be one of the slowest-growing segments.

Interesting question asked by a reader in Minneapolis.

He's wondering if Isilon is involved in Google's book digitization project, which leapt ahead yesterday when a consortium of 12 major universities signed on.

I'd think Google would go it alone but perhaps a third-party storage provider like Isilon would help the company keep the project apace. It could also increase the comfort level for libraries nervous about storing everything with Google.

Isilon's spokesman wouldn't comment, saying he couldn't tell me anything about any such deal until it was formally announced. He wouldn't deny there's a relationship with Google, either, but I don't want to insinuate too much.

"Technically I can't really say anything because if it hasn't been discussed I can't coment on it,'' spokesman Lucas Welch said.

So will he deny Isilon's working with Google?

"At this time Isilon has no comment on Google's book digitization project."

Hmmm.

I've asked for Google's comment and haven't heard back yet.

Could it be that investors are worried Cray is going into the low-margin furniture business?

Check out Gizmodo's gallery of nursery furniture made from old Cray supercomputers. They came from a site that's now overloaded with hits.

Are big companies worrying less about security than little ones?

In their latest survey of enterprise CIOs, Goldman Sachs analysts found that security has abruptly fallen down the list of priorities -- to 11th place, down from its consistent 2nd place showing in recent years. From their report:

A slippage in security as a spending priority may indicate some increased comfort with security issues in the enterprise, not completely surprising since most core security technologies are viewed as fairly mature. It could also be partially a result of few high-profile security breaches or highly disruptive malware incidents in recent memory.

But another survey released today said security will be the top priority for IT organizations this year. That's up from a second-place showing in last year's survey of IT pros by CompTIA (the Computer Computing Technology Industry Association).

Here's part of CompTIA Chief Executive John Venator's quote in the release:

"The proliferation of devices that are now connected to networks, and the increasing mobility of customers and workers have pushed security to top of mind for everyone, from the technician monitoring the network to the business owners and operators whose livelihood can be at risk in the event of a security catastrophe."

Goldman also found that enterprises are taking their time upgrading to Vista, with most saying they'll wait until they refresh PCs within the next year and a half. Vista upgrades are planned within the next year by 6 percent of respondents, and another 48 percent say it will happen within 18 months.

More surprising: Software-as-a-service ranked dead last on the priority list. The analysts' take:

"We note that large-company CIOs, which chiefly comprise our panel, are likely to be slower in their adoption of SaaS given large and complex legacy installations and cultural inertia. However, offerings from leading SaaS vendors are seeing increasing adoption by large enterprises, and most large CIOs we speak with are considering where SaaS offerings make sense if they have not adopted it already in certain areas."

The Boise chipmaker jumped on the energy efficiency bandwagon today with new memory products it says could reduce data center power needs by 24 percent.

Server builders are the target customer for the low-voltage DDR2 DRAM in reduced chip count memory modules launched today. It's the first prouct in Micron's new "Aspen" line of more energy efficient products; eventually they'll also be aimed at laptops as well.

The products released today operate at 1.5 volts, instead of the 1.8 volts that's standard in servers today. EE Times has some perspective.

As if data centers needed anymore heat -- now they're getting sexy hardware, according to ComputerWorld. Don't worry, the pictures are safe for work.

This story's all over the Web today: An Alaska state technician accidently reformatted a backup drive containing information on the $38 billion oil sales account that pays state residents an annual dividend.

Backup tapes turned out to be unreadable, even after Microsoft and Dell pitched in to help recover the data.

In the end the state had to rescan the original paperwork, which fortunately was still there, stored in 300 cardboard boxes. That cost $200,000 and the snafu will reduce Alaskans' oil dividend checks by 37 cents apiece.

I wonder if Alaska hired the techician from the King County elections office.

Software's been booming lately, with companies spending more now than they did during the Y2K upgrade surge, according to a new Merrill Lynch analysis of U.S. software spending.

Software's share of total IT spending has reached a record 44 percent. The $200 billion question is what will happen when the cycle ends.

Concerned about poor showings by SAP and Oracle, the firm dissected U.S. software spending reported by the Bureau of Economic Analysis.

First the bad news:

"The data indicates that US software spending is at high levels relative to historical norms and does not have enough cushion if we get spending headwinds."

On a more positive note: Just because spending is reaching bubble levels, that doesn't mean there will be a burst, the firm said:

"Our analysis of US Bureau of Economic Analysis (BEA) data indicates that contrary to popular belief, US software spending has eclipsed Y2K and Internet bubble levels. Concluding from this that we are poised for some type of a correction or downswing could be a mistake."

It may not crash, but the run won't last forever:

"Part of the reason for this is the steadiness provided by maintenance renewals and in-house spending. The variable portion of the spending pie is the external spend on commercial software, which is relatively more discretionary. Software is a larger industry than ever before, thus it is also more cyclical and susceptible to a macroeconomic slowdown and cutbacks in spending. That said, we don't sense sharp cutbacks on the cards as we saw during the 2001-2002 downturn but the level of outperformance of US software spending relative to broader IT spending may not be sustainable."

There's a silver lining for customers, though: While prices are rising for most products in the U.S., there's deflation in the tech industry. That means companies are getting more for their money from software vendors:

"Although it is difficult to reach a conclusion based solely on real data, we can observe that software companies are providing greater value for a given level of spending due to the declining prices or deflation."

Trends are favoring packaged software over custom solutions. That's also good for the kind of software companies we have around here, but may be worrisome to in-house developers:

"The growth in spending on prepackaged software has been far ahead of custom software and internally developed software. Since 2000, prepackaged software has grown at 9.4% per year, vs. 4.0% for own account software, and well ahead of custom software which has declined at a rate of 3.6% per year. Accordingly, the percentage of total spending invested in prepackaged software has increased from about 28.0% in 2000 to roughly 37.3% in 2005. This was largely at the expense of custom software which saw its share shrink from 36.6% to 25.9% over the same period."

"Microsoft with Vista/Office 2007, Red Hat with upcoming RHEL 5.0 release and Salesforce.com, WebEx, and Blackboard with disruptive bu iness models should be well-positioned to ride out a potentially choppy spending environment."

So what will Sunny Gupta do next?

He hit a home run with iConclude, the Bellevue enterprise software company he founded two years ago and sold last night for $60 million to Sunnyvale, Calif.-based Opsware.

The 36-year-old entrepreneur could retire on the proceeds, but he's not done yet.

He'll join Opsware as a senior vice president to help integrate iConclude's automated network diagnostics technology, but it may not be a permanent position.

Gupta said he may start another company in the enterprise space. He'd also be likely to keep working with Madrona Venture Partners, which led iConclude's funding. (It received $3 million in the first round and $9 million in the second. Tricia Duryee has some financial details about the sale here).

I'm curious to see how big the next one will get. Gupta said he wanted to keep growing iConclude but offers started coming in, and the Opsware deal was too good to pass up.

"Our desire was really to go all the way but you know, when you have something so compelling in front of you, for two years' worth of work, it was hard to walk away from that,'' he said.

All 45 of the iConclude employees will join Opsware and they'll continue working here. But the iConclude brand is likely to go away after the technology is absorbed.

The Seattle area has spawned a lot of enterprise startups, but they seem to always get snapped up before they grow to enterprise scale themselves.

That's good for entrepreneurs and their investors, but the region ends up with a gulf between the startups and the giants like Microsoft and Amazon.com.

Gupta said there's not a lot of innovation taking place at the big enterprise vendors so they're on the prowl for startups with compelling products and customer acceptance. That's why iConclude was snapped up "right when we're about to hit the gas pedal."

"The big companies are all looking for new products they can push through their sales engines,'' he said.

A cluster of data points from Isilon's presentation today at the RBC Dain Rauscher investment conference in Seattle:

-- The company reiterated recent guidance saying that it will be profitable by the "latter part of 2007."

-- Growth of digital content will expand Isilon's potential market from $2.5 billion today to $8 billion to $9 billion by 2009, Chief Executive Steve Goldman said.

-- Forty percent of its customers were signed up in the past six month. Fifty percent of its business is from repeat customers.

-- A growing cash pile is helping to convince customers that Isilon won't fade away. Cash was $99.9 million at the end of 2006, up from $10.9 million at the end of 2005.

-- Diversification is under way. Kodak, the biggest customer, accounted for 20 percent of sales in 2005. Last year it accounted for 10 percent, and Comcast accounted for 16 percent.

-- Operating margin losses were 12 percent in the past quarter, down from 41 percent in the first quarter of 2006.

-- Revenue from software is climbing steadily, from 3 percent to 5 percent to 8 percent over the past three quarters.

-- By the end of 2007, Isilon will double the number of software applications that run on its OneFS operating system -- from three to six applications.

"That's a rate of innovation that's way more rapid than what you see in the traditional storage environment,'' Goldman said.

A cluster of data points from Isilon's presentation today at the RBC Dain Rauscher investment conference in Seattle:

-- The company reiterated recent guidance saying that it will be profitable by the "latter part of 2007."

-- Growth of digital content will expand Isilon's potential market from $2.5 billion today to $8 billion to $9 billion by 2009, Chief Executive Steve Goldman said.

-- Forty percent of its customers were signed up in the past six month. Fifty percent of its business is from repeat customers.

-- A growing cash pile is helping to convince customers that Isilon won't fade away. Cash was $99.9 million at the end of 2006, up from $10.9 million at the end of 2005.

-- Diversification is under way. Kodak, the biggest customer, accounted for 20 percent of sales in 2005. Last year it accounted for 10 percent, and Comcast accounted for 16 percent.

-- Operating margin losses were 12 percent in the past quarter, down from 41 percent in the first quarter of 2006.

-- Revenue from software is climbing steadily, from 3 percent to 5 percent to 8 percent over the past three quarters.

-- By the end of 2007, Isilon will double the number of software applications that run on its OneFS operating system -- from three to six applications.

"That's a rate of innovation that's way more rapid than what you see in the traditional storage environment,'' Goldman said.

I've been wondering how Seattle supercomputer maker Cray would fare as commodity PCs are supersized by multicore processors.

That's actually creating opportunity for Cray, according to Peter Ungaro, the former IBMer who has led Cray's turnaround over the past two years.

Processors are plenty powerful. The bottleneck in high-performance computing is now data throughput, an area where Cray has leading technology, he said during an RBC Dain Rauscher investment conference in Seattle today.

"It's not anymore about how fast is the processor. At the high end of the market it's how fast you can feed the processor," he said.

That creates an opportunity for Cray to productize and sell its technologies, as well as systems.

Cray is also offering its supercomputer customers more products, including technology services and storage solutions.

Those new thrusts could expand the company's potential market from $1.5 billion to $5 billion in the coming years, he said.

That's part of why Cray is so upbeat. The core business is also doing pretty well. Cray signed $600 million worth of contracts last year, and already in 2007 it has signed $100 million. It's also rolling out three new systems.

The revenue includes a big defense research contract that runs through 2010.

CFO Vic Chynoweth said the company expects sales growth of 5 percent to 20 percent in 2007, and the long-term forecast is 10 to 20 percent growth.

Operating income this year is expected to grow 3 percent to 7 percent, he said, and long-term it's projected to grow 10 to 15 percent.

In the short-term, Cray withstood much of today's stock market correction. It was down 0.95 percent this afternoon at $13.55.

As a supplier of proprietary technology used by secretive U.S. government agencies, it doesn't have much exposure in China.

I've been wondering how Seattle supercomputer maker Cray would fare as commodity PCs are supersized by multicore processors.

That's actually creating opportunity for Cray, according to Peter Ungaro, the former IBMer who has led Cray's turnaround over the past two years.

Processors are plenty powerful. The bottleneck in high-performance computing is now data throughput, an area where Cray has leading technology, he said during an RBC Dain Rauscher investment conference in Seattle today.

"It's not anymore about how fast is the processor. At the high end of the market it's how fast you can feed the processor," he said.

That creates an opportunity for Cray to productize and sell its technologies, as well as systems.

Cray is also offering its supercomputer customers more products, including technology services and storage solutions.

Those new thrusts could expand the company's potential market from $1.5 billion to $5 billion in the coming years, he said.

That's part of why Cray is so upbeat. The core business is also doing pretty well. Cray signed $600 million worth of contracts last year, and already in 2007 it has signed $100 million. It's also rolling out three new systems.

The revenue includes a big defense research contract that runs through 2010.

CFO Vic Chynoweth said the company expects sales growth of 5 percent to 20 percent in 2007, and the long-term forecast is 10 to 20 percent growth.

Operating income this year is expected to grow 3 percent to 7 percent, he said, and long-term it's projected to grow 10 to 15 percent.

In the short-term, Cray withstood much of today's stock market correction. It was down 0.95 percent this afternoon at $13.55.

As a supplier of proprietary technology used by secretive U.S. government agencies, it doesn't have much exposure in China.

At least that's the word from Patricia Ryan, head of Microsoft's enterprise sales in the Northwest region.

Ryan's not an objective source, of course.

But she must have a good handle on regional software demand, after 26 years of selling to big companies around here.

Microsoft

Patricia Ryan

After graduating from Stanford she came to Seattle to work for IBM for 13 years. Then she handled enterprise sales at WRQ for nine years before Microsoft recruited her four years ago.

She also shared some interesting stats.

Ryan said 80 percent of the big companies in her region (with 500 or more employees) have Microsoft enterprise licensing agreements.

They apparently like Vista and Office, because 100 percent have renewed their licensing agreements, she told me during an interview at a local launch event Microsoft held today at the convention center in Seattle.

Microsoft played up local customers at the event. Washington Mutual and Columbia Sportswear were highlighted as beta testers that helped refine the company's latest software.

Most every big name company in the region uses Microsoft software at least on its PC desktops.

I was wondering if Ryan had a home-court advantage selling Microsoft to the locals.

She said the connections are nice, but not essential. She has met customers who went to school with Bill Gates or socialize with executives and product developers. Sometimes those customers will have product information she hasn't heard about yet.

But she said Microsoft doesn't get a free pass from other companies in the region.

"We earn our right to be there every day,'' she said.

Today's column looked at Google Applications and the company's decision to charge for the new business suite.

I focused on the fees because they could signal a potentially big shift happening at Google and other Web services companies.

Also important is Google Apps' focus on communications. Much of the coverage focused on the suite competing with Office, in part because they both have word processors and spreadsheets.

But the real battle seems to be over message handling -- e-mail, IM and VoIP. Those services are the foundation of productivity now, and that's where Google Apps seems to be aiming at Exchange and other Microsoft communications servers.

Microsoft's also going after business VoIP in a big way. Just this morning Bill Gates talked up new Office communication products in the pipeline.

Eventually "that PBX won't be necessary,'' he said during a speech at a local launch event for Windows Vista, Office 2007 and Exchange Server 2007.

Upcoming products that Gates mentioned may end up competing with Google Apps: Office Communicator 2007, Office Communcations Server 2007 and Voice Call Management for Office Communcations Server 2007.

If nothing else, Google Apps could do for Microsoft's small business customers what Linux has done for enterprise customers over the last few years: It will give them more leverage when negotiating license deals.

Frances Allen, an IBM researcher, just became the first female winner of the A.M. Turing Award, computing's Nobel Prize. The prize was announced today and will be presented at an Association for Computing Machinery event in June.

Allen has an amazing story. In 1957 she was a math teacher who needed to pay off her college debt, so she started working at IBM, teaching the FORTRAN language to researchers.

She went on to become an expert in compilers and high-performance systems, advancing technology used for tasks such as DNA matching and weather forecasting.

"Fran Allen's work has led to remarkable advances in compiler design and machine architecture that are at the foundation of modern high-performance computing," Ruzena Bajcsy, a University of California, Berkeley professor and chair of the ACM Turing Award committee, said in the release.

"Her contributions have spanned most of the history of computer science, and have made possible computing techniques that we rely on today in business and technology. It is interesting to note Allen's role in highly secret intelligence work on security codes for the organization now known as the National Security Agency, since it was Alan Turing, the namesake of this prestigious award, who devised techniques to help break the German codes during World War II."

The award cited her "pioneering contributions to the theory and practice of optimizing compiler techniques that laid the foundation for modern optimizing compilers and automatic parallel execution."

Allen's also an environmentalist and mountain climber who has gone on exploratory expeditions to the Arctic and the border between China and Tibet, according to her IBM biography.

She became the first woman named an IBM Fellow in 1989, and in 2004 won the first Anita Borg Award for working to increase the participation of women in the tech industry.

This time it's Corillian, a Hillsboro, Ore.-based company that's a major provider of online banking technology used by banks and credit unions.

The 10-year-old, publicly traded outfit was sold today to Atlanta-based CheckFree Corp. for $245 million, or $5.15 per share.

That's a 60 percent premium to its stock price as of Feb. 7, noted Financial Technology Partners, a San Franscisco investment bank that worked on the deal.

You may have been using Corillian software without knowing it. It says more than 30 of the top 100 banks and 21 of the top credit unions are using its online banking platform and billing systems.

Corillian closed at $5 today, up 45 percent and its best showing since December 2004. CheckFree was down 3 percent at $40.29.

I miss being able to say Wintel.

In a partnership being announced right now, the two will work together to promote and optimize Sun's Solaris and Java on Intel's Xeon chips.

They'll also work together optimizing future multicore Intel platforms for Solaris.

The Webcast and slides are here.

Intel's been losing ground to AMD, and Sun's success with x86 servers have helped it close the gap with server leaders IBM and Hewlett-Packard, according to the August IDC numbers.

It's interesting, but the long-term possibilities of a Sun-Intel alliance are more intriguing.

Could Intel ever provide all of Sun's chips? What will this to the Microsoft-AMD relationship? How about the virtualization play -- will the alliance give Sun an edge on virtualized Intel Xeon systems?

New Microsoft licensing plans coming with Vista and Office 2007 will cost corporations between $68 and $406, roughly, per desktop per year, according to a roundup published by CRN.

One of the big questions about the Indian outsourcing industry is how it will fare when wages rise and its labor cost advantage declines.

An early test of its resiliency has come with the recent increase of the rupee's value.

Infosys said it's weathering the storm and maintaining margins even though the currency situation increased its operating costs by 200 basis points in its third quarter.

The company reported today that earnings per share were up 50 percent -- to 39 cents, from 26 cents -- and sales were up 47 percent.

It's expecting sales in the next quarter, ending in March, to grow 45 percent and earnings per share to grow 42 percent.

Infosys added 43 clients during the quarter and had a net gain of 3,282 employees.

"As our clients focus on enhancing their competitiveness, they are leveraging our capability to drive their transformation programs,'' Chief Executive Nandan Nilekani said in the release.

Nilekani has been called the Bill Gates of India. He's also friends with the real Bill and attended his CEO Summit in Redmond last year.

If Nilekani comes to the summit this year, he and the CEOs may be discussing how Infosys is transforming itself to maintain its margin.

Steve Ballmer launched the 64-bit spambuster at a little shindig in New York, but the product wasn't quite done. A spokeswoman just told me that Microsoft will release it to manufacturers tomorrow.

Highlights include speech recognition, improved security and support for 11 languages. Free 120-day trial versions are available here.

Garage party time?

Those were the most optimistic estimates by a group of techies who made 2007 predictions during a WSA dinner event Tuesday night.

Five of the six panelists expect Microsoft shares to rise 10 percent or more, reaching $35 to $37. The sixth, Sun Microsystems principal engineer Fulup Ar Soll, said he has "no idea" where the stock will go next year.

Soll was also the skeptic about Google, which he said is valued at much more than it would cost to rebuild the company. "I don't think it's logical,'' he said.

Ray Wang, a Forrester Research analyst who predicted Microsoft will hit $55, expects Google to reach $550.

Local futurist Glenn Hiemstra predicts Google will reach $650. Accenture consultant Robin Murdoch said it will go "well over $600, maybe even $650" by the end of 2007.

IBM Linux architect Gerrit Huizenga said $620 to $650 because "the growth to me is obviously there."

Even former Microsoft strategist T.A. McCann expects Google to hit $620. "They'll just continue to take share of advertising dollars that come online, and more are coming online," he said.

There was a consensus that Microsoft's not going to produce another operating system like Vista, but they had different takes. Huizenga said another five-year deployment won't work, and pointed to open source projects like Apache, Linux and Eclipse where people get features they want faster. "We have to be able to deliver it on a frequent and regular schedule in terms of advancements,'' he said.

Wang predicted a shift to a more distributed development approach, similar to the way Boeing dispersed 787 development. "People are going to build these things off social networking sites, code's going to be created, shared,'' he said.

What's overhyped and likely to decline in 2007?

Wang: Software as a service. It will morph, so you'll see software delivered as a service, but you won't hear as much about SAAS.

Hiemstra and Huizenga: Blogs and other user generated content. "The vast majority of people will get worn out ... and say I can't keep up, I can't do that anymore,'' Hiemstra said.

Foll: Proprietary technologies, including Skype and Microsoft's Word format.

Murdoch: Wireless streaming of TV to cellphones.

McCann: AOL.

Local software companies hoping to ride the wave include:

-- Seattle's Attachmate, which today announced Reflection 2007, a new terminal emulation product designed for Visa and Office 2007. Attachmate is taking advantage of Microsoft's offer of royalty-free licenses to use the Office "Ribbon" interface in Reflection.

-- Bellevue's Laplink, which makes software for transferring your digital stuff to a new PC. Its PCmover product was the top selling migration utility in the U.S. last month, claiming 39 percent of sales by unit.

"As we move into the holiday season and the launch of Vista early next year, we expect that PCmover will take an even more commanding sales lead,'' Laplink chief executive, Thomas Koll, said in a release.

Who else should I add to the list?

In a big win for Bellevue startup iConclude, Indian outsourcing giant Wipro will use iConclude's automated data center management technology.

Wipro will use the software at its "global command center," which runs data centers for clients such as GE from Wipro offices in Bangalore, India; Santa Clara, Calif.; and London.

I wonder how visible iConclude's technology will be at the center. A stream of visitors -- including representatives of major companies around the world -- see the center when touring Wipro's Bangalore campus.

Veterans of Mercury Interactive started iConclude a little more than a year ago and have since landed $12 million in venture funding from Madrona, Greylock Partners and Shasta Ventures.

Bellevue startup iConclude will get a boost from a new partnership with Opsware, the Sunnyvale, Calif.-based data-center automation heavyweight. Opsware will sell iConclude's automation technology through its global sales network -- similar to the way Budweiser distributes Redhook microbrews.

Across the lake in Seattle, Microsoft's outgoing SQL boss Paul Flessner talked up several product releases at the PASS database conference:

-- A beta preview of SQL Server 2005's SP2 is now available, featuring updates such as data compression, additional business intelligence features, security updates, support for Vista and optimization for the 2007 Office System.

-- A release candidate of SQL Server 2005 Compact Edition.

-- He also announced that Visual Studio Team Edition for Database Professionals will be released to manufacturing Nov. 30. It may be a great product, but VSTEDP sounds like something to discuss with a urologist.

I was lucky to get in touch with Linus Torvalds for today's column on the Microsoft-Novell deal. Getting his perspective helped shape my ideas, and he gave me a terrific quote.

Wall Street has moved on to other things, like rising oil prices and interest rate worries.

Going forward I'm not sure how we'll track the success of the partnership and its effect on Linux. Hopefully customers will make it known whether their situation improves.

Merrill Lynch analyst Kash Rangan thinks Red Hat will be benefit the most, partly because Novell's credibility with the open-source community will decline. That's probably why Red Hat declined to enter a similar partnership with Microsoft, he said.

I don't think the credibility issue is that significant, especially among the big enterprise customers who are more concerned about cost, efficiency and service than the purity of their open-source software.

Rangan did make a good point about the indemnification protection that's part of the Microsoft-Novell Linux offering. He said that's an old issue that hasn't limited Linux uptake lately.

"Linux/RedHat survived and thrived through the indemnification (perhaps intimidation) and patent issues raised by SCO 2-3 years back,'' he wrote. "Understandably, Microsoft is raising the profile of the issue in order to secure its Windows franchise and monetize Linux synthetically, and Novell sees this as an opportunity to regain its relevance in Linux."

It's not the first time Microsoft has raised that issue with customers. Here's a story about Steve Ballmer's infamous Singapore speech in 2004. This followup story sheds light on Microsoft's concerns about intellectual property that factored into the Novell agreement.

Larry Ellison today put to rest speculation about Oracle distributing its own version of Linux. Instead the company will offer Red Hat support to its customers.

If Oracle gets the support dollars instead of Red Hat, will Red Hat make enough money to keep improving the software?

Maybe Ellison's was saying Oracle will distribute a version of Linux eventually, after it has bled Red Hat to death.

Third quarter sales for EMC's hot virtualization subsidiary were up 86 percent to $188.5 million, its biggest surge in more than a year.

EMC's overall sales were up 19 percent, according to today's earnings release.

The quasi-local player in VMware's space is XenSource.

Both companies are based in Palo Alto, Calif., but XenSource is allied with Microsoft. It also recently opened an R&D office in Redmond that's led by former 'softies Frank Artale and Gordon Mangione.

Both companies also have open souce credentials, so it's no wonder Microsoft is opening up its own virtualization technology, although today's announcement in Brussels may be aimed more at European regulators than customers and developers.

Stocks of Indian IT companies took a huge hit in May, but Infosys seems to be doing fine.

Q2 earnings at the Bangalore-based services giant were up 42 percent over the same period last year, to $746 million, according to its quarterly report out today.

Earnings per share were 36 cents, up from 25 cents a year ago.

Next year's growth was forecasted to be around 41 percent, surpassing $3 billion in sales.

Infosys also increased its workforce by 7,741, growing to 66,150 -- nearly as big as Microsoft.

One project that boosted the quarter: Helping a big but unnamed U.S. cable company develop quadruple-play services -- cable, telephony, wireless and broadband.

Here's a look at how INFY has pulled back from the May downturn.

The Wall Street Journal has a neat story about the risks of filming dogfight scenes in the new aviation movie, Flyboys.

Almost in passing, it mentions that funding came largely from Oracle boss Larry Ellison.

Apparently the movie project languished until Ellison's 23-year-old son, David, heard about it and got involved. The paper described David Ellison as an aerobatic pilot and aspiring filmmaker.

Technorati Profile

The firm initiated analyst coverage with a "neutral" rating of the Redmond provider of corporate expense software and services.

Concur's stock has been on a tear, up about 24 percent over the last year. The research note suggests it could have more potential, calling it the "only 'pure-play' OnDemand T&E company."

"In our opinion, Concur could have higher future growth than management
estimates, if the company were to ramp up investments in operating resources
such as sales and marketing. Although the timing is uncertain, on the flipside,
investors will have to weigh revenue acceleration versus margin compression."

The coverage didn't do much for the stock today. CNQR closed down 77 cents, or 5 percent, at $4.79.

The Computer History Museum is hosting an interesting event Thursday night to mark the 30th anniversary of the first Cray supercomputer, the Cray 1 that was delivered to the Los Alamos National Laboratory in 1976.

A talk will cover the history of founder Seymour Cray, his company and the supercomputer.

Cray is now a Seattle company, but the talk is likely to focus on its pre-Seattle days. Cray merged with Silicon Graphics in 1996, then the SGI division merged with Seattle-based Tera Computer in 2000. Tera renamed itself Cray, and now Cray is Seattle's most prominent manufacturer of computer hardware.

Moderating the talk will be Burton Smith, Tera's founder and chief scientist until last year, when he became a technical fellow at Microsoft.

The museum is in Mountain View near Microsoft's Silicon Valley campus. If the Cray event is a hit, they ought to have an encore here in Seattle.

At least that's what Merrill Lynch concluded from its latest CIO survey.

The survey found that 59 percent of CIOs expect to increase spending in the rest of 2006, up from 47 percent who were expecting an increase as of April. Only 2 percent expect a spending slowdown "due to macroeconomic concerns."

CIOs are also warming up to Vista. The survey found 15 percent plan to upgrade to Vista in 2007, up from 8 percent in the April survey. Only 39 percent are waiting for clarity about the product, down from 75 percent in the previous survey.

Some are cooling to Linux. The survey found 48 percent of CIOs expect to increase Linux usage this year, down from 59 percent in April.

The survey involved 100 chief information officers in North America.

Francisco Partners, the investment group that bought WatchGuard today, was also involved in the purchase and merger of WRQ and Attachmate. Will it roll WatchGuard into the bundle?

If so, we've got a new ticker candidate: WAW, for WatchGuard-Attachmate-WRQ.

WRQ, a legendary name in Seattle's tech community, is no more. After a series of mergers that created AttachmateWRQ, the company recently dropped WRQ from its name and now goes by Attachmate.

Was it some kind of payback? After WRQ merged with Attachmate last year, headquarters were based in WRQ's Seattle offices. So WRQ got to keep its offices, and Attachmate got to keep its name.

The renaming was slipped into a press release on another topic, the finalization of the company's acquisition of NetIQ. The $495 million deal creates "a $400 million company serving more than 40,000 customers in over 60 countries, with near complete penetration of the Global 10,000."

It sounds like IPO time. They ought to pay homage to WRQ by listing the stock as AWRQ.

Oracle and IBM may gang up against Red Hat by jointly supporting their own enterprise version of Linux, according to a Goldman Sachs report issued today.

Wall Street has speculated for weeks that Oracle will offer its own operating system, perhaps based on Red Hat's open source system. Goldman followed up by interviewing Eben Moglen, general counsel to the Free Software Foundation.

The conclusions: Oracle can "legally replicate" Red Hat Enterprise Linux, a move that could eventually give Oracle 10 percent of the Linux market.

"We believe Oracle may also seek IBM's support, possibly for a joint Linux distribution. To date, however, IBM has not been as combative as Oracle in openly discussing plans to compete with Red Hat,'' it said.

Red Hat has benefited from the big enterprise companies' contributions to Linux, but that may change.

"For Oracle, IBM, and HP, supporting the Linux movement meant developing an independent operating system platform that could offer them cheaper total cost of ownership stack to compete against Microsoft and Sun,'' the report said. "However, in supporting Red Hat and Novell in the Linux market, none of these open source community partners ever intended for one company, Red Hat, to obtain a dominate market position in Linux and move up the infrastructure stack to compete against them in the way Microsoft does. Ironically, it seems that Red Hat's partners have helped to create another company like Microsoft that can leverage its dominant operating system position and deliver great value up the infrastructure stack (operating system + application server + database + middleware + applications) and compete more broadly against these vendors."

What's going to happen to ADIC Chief Executive Peter van Oppen after the Quantum merger? It would be tough to move from Mercer Island to San Jose, Calif.

Perhaps van Oppen will join his pal and fellow Whitman College alum John Stanton at Trilogy Equity Partners, the low-profile venture firm Stanton started after selling Western Wireless to Alltel for $4.4 billion. After selling ADIC for $770 million, van Oppen merits at least a window office.

In a deal valued about $495 million, AttachmateWRQ today is acquiring NetIQ, a publicly traded IT management systems company based in San Jose, Calif.

The deal comes just a year after Attachmate and WRQ merged, and a year and half after privately held WRQ sold itself to a group of Bay Area investment firms.

NetIQ produces security management technology, tools that companies use to be sure they're following safe IT practices and managing service levels and risk. It gives AttachmateWRQ a broader lineup of enterprise software.

But the real motivation may be to give AttachmateWRQ the heft it needs to attract additional investors and perhaps go public. The announcement didn't say this, but it pointed out the size of the combined company:

"Together, AttachmateWRQ and NetIQ comprise a $400 million company, serving over 40,000 customers in over 60 countries, with near complete market penetration of the Global 10,000,'' it said. "AttachmateWRQ, with NetIQ, is uniquely prepared to provide mission-critical enterprise software that enables customers to extend, manage and secure their IT infrastructures."