2001: Defining Moments

Amid despair, there's hope for the future.

September 11, 8:46 a.m.

More than the story of the year, it has become the story of our lives. The terrorist attacks of Sept. 11 had many targets beyond the structures of the World Trade Center and the Pentagon. The terrorists took aim at the U.S. economy, its information and communications systems, its leaders, and the spirit of the American people. Yet as the towers fell, the rest stood tall.

The economy, already sliding into a recession by Sept. 11, has begun to bounce back. Business took a week off while Lower Manhattan uncovered from the rubble. The Dow Jones industrial average, which peaked in May at 11,350, has been climbing steadily since falling to 8,062 in late September.

Most of the data residing in the WTC complex was saved as disaster recovery plans—many hatched to thwart potential Y2K debacles two years earlier—worked. Companies such as Cantor Fitzgerald LP, the hardest hit of all WTC tenants, and the New York Board of Trade, a resident of 4 World Trade Center, were back in business within days of the attacks.

While cell phone and many telephone lines became jammed Sept. 11, e-mail and instant messaging systems proved to be the most reliable means of communication. Electronic systems also got renewed looks in the wake of the anthrax-through-the-mail scare that hit in the early fall.

As war raged in Afghanistan, lawmakers cracked down at home, passing anti-terrorism legislation that threatened civil liberties yet spared restrictions on technology such as strong cryptography, despite the fact that it could be used by terrorists.

It became popular to blame Sept. 11 for everything from the struggling economy to failed product launches and also to credit it for enabling such things as a quick settlement to Microsoft Corp.s antitrust case. But despite the many successes we have had in dealing with the tragedies, we continue to struggle with getting on with our lives in the face of terror, never forgetting that as the year closes, rescue workers were still uncovering the remains of victims in the tangled mess of the WTC.

Microsoft: Trial and error


Bill Gates & Co. have got to be feeling like Jack Nicholson at the end of the Oscar-winning movie "Terms of Endearment": They were just inches from a clean getaway.

After years of fighting, both in and out of court, Microsoft announced Nov. 2 that it had settled its anti-trust case with the U.S. Department of Justice and nine of the states involved in the case. On Nov. 20, the company said it had settled more than 100 other private antitrust suits. Now, after opponents and appeals have been heard, all the deals are up for grabs, meaning Microsoft may not get off so lightly after all.

From the beginning of the DOJs case against Microsoft, expediency has been the rule of the day, and now it looks as if it may be the undoing of the settlements. Original case Judge Thomas Penfield Jacksons breakup order was vacated June 28, with the U.S. Court of Appeals for the District of Columbia Circuit criticizing Jacksons behavior and apparent bias.

That court, at the same time, upheld the findings of fact and abuse-of-monopoly-power verdict. But when the DOJ announced in early September that it would not seek a breakup, it effectively gave away the only leverage it had for a punitive remedy.

In the wake of Sept. 11, settlement talks heated up. Microsoft Chairman Bill Gates and CEO Steve Ballmer announced the agreement and specifically cited the attacks as a motivating factor to end the litigation and move on. The deal was a good one for Microsoft, but the company underestimated the wrath of the nine remaining states, competitors and the U.S. Senate, all of which made progress by the end of the year toward retrying the remedy portion of the case.

The $1 billion private settlement—which would see Microsoft populate the nations less-privileged schools with free software and computers—was getting a stiff review from Maryland District Judge J. Frederick Motz as well as competitors such as Apple Computer Inc., whose leadership status in the school market would be threatened by the proposal.

As 2002 dawns, we are no closer to an end of the case than we were at this time last year. The dissenting states made a counterproposal in December, and if Gates wanted to, he could probably end it tomorrow. But if theres anything else that has been underestimated, its the depth of Microsofts legal well and its stubbornness.

HP-Compaq: On the ropes


Another deal that appeared to be going sour at years close was the proposed merger between Hewlett-Packard Co. and Compaq Computer Corp.—a deal that heralded the end of the PC-centric era.

The shocking announcement from Compaq CEO Michael Capellas and HPs Carly Fiorina Sept. 3 raised more questions than answers: With so much overlap, whose products would survive? The proposed marriage was greeted by disapproval from customers, Wall Street and the industry at large, but the two titans were determined that a merger was the only way to save themselves in a slowing economy.

The proposed deal has been besieged on many fronts, not the least of which was the Sept. 11 attacks and stock market nose dive that reduced the value of the deal by billions of dollars. However, the biggest opponents of the deal were not outsiders, but HPs own shareholders represented by the Hewlett and Packard families and foundations, which together represent 17 percent of the outstanding HP stock.

Worms, viruses, Microsoft


Malicious-code writers still are getting the upper hand on overworked IT managers and uninformed users. The tally this year: Code Red (July); Sircam (July); Nimda (September); Goner (December); Badtrans.B (December); Reeezack (December).

This years viruses followed in the footsteps of the first modern worm—Melissa, which struck in May 2000—and built on it with so-called blended threats. Code Red, for instance, defaced Web servers and installed a distributed-denial-of-service client. But Nimda attacked in different ways: through e-mail, infected Web pages, shared network drives and infected files.

The industry finally started to focus on the responsibility of Microsoft in light of the continued exploits against its software.

For instance, Gartner Inc. suggested this fall that its clients stop using Microsofts Internet Information Services server.

Microsoft twice announced rededicated security initiatives, but none grabbed the fancy of the industry, and to date, none have thwarted the attack of any hacker determined to get past the bullet-riddled shell of its software.

Everything else


In a year of the biggest stories ever, many others of significance could have been overlooked. Make no mistake about it: 2001 was the year that the dot-com economy died; Microsoft shipped Windows XP and Office XP but faced growing challenges from Linux and other open-source software alternatives; Napster Inc.s free music-swapping service was closed down, and new pay services from America Online Inc., RealNetworks Inc. and Yahoo Inc. were launched; shareholders attempted a revolt at Computer Associates International Inc. but were shot down; and Compaq killed the Alpha processor, once one of the crown jewels of Digital Equipment Corp. In addition, eWeek lifted the veil on the fear tactics used by the Business Software Alliance in its campaign against software piracy, as well as its ties to Microsoft.

There was news enough for everyone. But heres to a more uneventful 2002.

Scot Petersen

Scot Petersen

Scot Petersen is a technology analyst at Ziff Brothers Investments, a private investment firm. Prior to joining Ziff Brothers, Scot was the editorial director, Business Applications & Architecture,...