An automated program lurking on the Internet has remotely taken over the PC and turned it into a “zombie.” That computer and other zombie machines are then assembled into systems called “botnets” — home and business PCs that are hooked together into a vast chain of cyber-robots that do the bidding of automated programs to send the majority of e-mail spam, to illegally seek financial information and to install malicious software on still more PCs.
Botnets remain an Internet scourge. Active zombie networks created by a growing criminal underground peaked last month at more than half a million computers, according to shadowserver.org, an organization that tracks botnets. Even though security experts have diminished the botnets to about 300,000 computers, that is still twice the number detected a year ago.
The actual numbers may be far larger; Microsoft investigators, who say they are tracking about 1,000 botnets at any given time, say the largest network still controls several million PCs.
“The mean time to infection is less than five minutes,” said Richie Lai, who is part of Microsoft’s Internet Safety Enforcement Team, a group of about 20 researchers and investigators. The team is tackling a menace that in the last five years has grown from a computer hacker pastime to a dark business that is threatening the commercial viability of the Internet.
Any computer connected to the Internet can be vulnerable. Computer security executives recommend that PC owners run a variety of commercial malware detection programs, like Microsoft’s Malicious Software Removal Tool, to find infections of their computers. They should also protect the PCs behind a firewall and install security patches for operating systems and applications.
Even these steps are not a sure thing. Last week Secunia, a computer security firm, said it had tested a dozen leading PC security suites and found that the best one detected only 64 out of 300 software vulnerabilities that make it possible to install malware on a computer.
Botnet attacks now come with their own antivirus software, permitting the programs to take over a computer and then effectively remove other malware competitors. Mr. Campana said the Microsoft investigators were amazed recently to find a botnet that turned on the Microsoft Windows Update feature after taking over a computer, to defend its host from an invasion of competing infections.
Botnets have evolved quickly to make detection more difficult. During the last year botnets began using a technique called fast-flux, which involved generating a rapidly changing set of Internet addresses to make the botnet more difficult to locate and disrupt.
Companies have realized that the only way to combat the menace of botnets and modern computer crime is to build a global alliance that crosses corporate and national boundaries. On Tuesday, Microsoft, the world’s largest software company, will convene a gathering of the International Botnet Taskforce in Arlington, Va. At the conference, which is held twice a year, more than 175 members of government and law enforcement agencies, computer security companies and academics will discuss the latest strategies, including legal efforts.
Although the Microsoft team has filed more than 300 civil lawsuits against botnet operators, the company also relies on enforcement agencies like the F.B.I. and Interpol-related organizations for criminal prosecution.
Last month the alliance received support from new federal legislation, which for the first time specifically criminalized the use of botnets. Many of the bots are based in other countries, however, and Mr. Campana said there were many nations with no similar laws.
“It’s really a sort of cat-and-mouse situation with the underground,” said David Dittrich, a senior security engineer at the University of Washington Applied Physics Laboratory and a member of the International Botnet Taskforce. “Now there’s profit motive, and the people doing stuff for profit are doing unique and interesting things.”
Microsoft’s botnet hunters, who have kept a low profile until now, are led by Richard Boscovich, who until six months ago served as a federal prosecutor in Miami. Mr. Boscovich, a federal prosecutor for 18 years, said he was optimistic that despite the growing number of botnets, progress was being made against computer crime. Recent successes have led to arrests.
“Every time we have a story that says bot-herders get locked up, that helps,” said Mr. Boscovich, who in 2000 helped convict Jonathan James, a teenage computer hacker who had gained access to Defense Department and National Air and Space Administration computers.
To aid in its investigations, the Microsoft team has built elaborate software tools including traps called “honeypots” that are used to detect malware and a system called the Botnet Monitoring and Analysis Tool. The software is installed in several refrigerated server rooms on the Microsoft campus that are directly connected to the open Internet, both to mask its location and to make it possible to deploy software sensors around the globe.
The door to the room simply reads “the lab.” Inside are racks of hundreds of processors and terabytes of disk drives needed to capture the digital evidence that must be logged as carefully as evidence is maintained by crime scene investigators.
Detecting and disrupting botnets is a particularly delicate challenge that Microsoft will talk about only in vague terms. Their challenge parallels the traditional one of law enforcement’s placing informers inside criminal gangs.
Just as gangs will often force a recruit to commit a crime as a test of loyalty, in cyberspace, bot-herders will test recruits in an effort to weed out spies. Microsoft investigators would not discuss their solution to this problem, but said they avoided doing anything illegal with their software.
One possible approach would be to create sensors that would fool the bot-herders by appearing to do malicious things, but in fact not perform the actions.
In 2003 and 2004 Microsoft was deeply shaken by a succession of malicious software worm programs with names like “Blaster” and “Sasser,” that raced through the Internet, sowing chaos within corporations and among home computer users. Blaster was a personal affront to the software firm that has long prided itself on its technology prowess. The program contained a hidden message mocking Microsoft’s co-founder: “billy gates why do you make this possible? Stop making money and fix your software!!”
The company maintains that its current software is less vulnerable, but even as it fixed some problems, the threat to the world’s computers has become far greater. Mr. Campana said that there had been ups and downs in the fight against a new kind of criminal who could hide virtually anywhere in the world and strike with devilish cleverness.
“I come in every morning, and I think we’re making progress,” he said. At the same time, he said, botnets are not going to go away any time soon.
“There are a lot of very smart people doing very bad things
Tuesday, October 21, 2008
Read My Lips: Apple Is a Netbook Maker
Steve Jobs appeared as a surprise “special guest” on Apple’s earnings call Tuesday afternoon.
Mr. Jobs, Apple’s chief executive, has not taken part in one of the company’s conference calls with analysts since 2000, according to the company. His appearance served to underscore a number of points.
First, he sounded healthy, intense and on top of his game. Second, his statements about Apple and the economy suggest that the company may do much better at surviving a deep downturn than the rest of the consumer electronics industry. (No transcript is available yet but Silicon Alley Insider live-blogged the call.)
Mr. Jobs noted in particular the loyalty of Apple customers and suggested that while they might delay purchases, it was unlikely they will leave the computer maker for competitors.
Mr. Jobs also said that Apple has $25 billion in the bank and no debt, and the company plans to use its capital in creative ways to innovate and steal market share. He appeared to dismiss the idea that Apple might use the cash to buy back its stock and give a windfall to shareholders that way.
When a financial analyst said that Apple currently has enough money in the bank to hire all of the engineers in Silicon Valley for a lifetime, Mr. Jobs responded that the suggestion was a good idea.
But the most fun on the conference call came when he parried analysts’ questions about new product areas that Apple might or might not enter. A recurring question among Apple watchers for decades has been, “When is Apple going to introduce a low-cost computer?
Mr. Jobs answered that decades-old complaint by stating, “We don’t know how to build a sub-$500 computer that is not a piece of junk.” He argued instead that the company’s mission was to add more value for customers at current price points.
However, he gave a more nuanced answer to the question of whether Apple plans to jump into the “nascent” market for netbooks, essentially restating his comments on the question from last week at the Macbook introduction in Cupertino by saying the company was taking a wait-and-see attitude.
At the same time, he noted that the company already had a powerful entry in the category: the iPhone. (By that standard, Apple is already the dominant netbook manufacturer by orders of magnitude.)
Mr. Jobs, Apple’s chief executive, has not taken part in one of the company’s conference calls with analysts since 2000, according to the company. His appearance served to underscore a number of points.
First, he sounded healthy, intense and on top of his game. Second, his statements about Apple and the economy suggest that the company may do much better at surviving a deep downturn than the rest of the consumer electronics industry. (No transcript is available yet but Silicon Alley Insider live-blogged the call.)
Mr. Jobs noted in particular the loyalty of Apple customers and suggested that while they might delay purchases, it was unlikely they will leave the computer maker for competitors.
Mr. Jobs also said that Apple has $25 billion in the bank and no debt, and the company plans to use its capital in creative ways to innovate and steal market share. He appeared to dismiss the idea that Apple might use the cash to buy back its stock and give a windfall to shareholders that way.
When a financial analyst said that Apple currently has enough money in the bank to hire all of the engineers in Silicon Valley for a lifetime, Mr. Jobs responded that the suggestion was a good idea.
But the most fun on the conference call came when he parried analysts’ questions about new product areas that Apple might or might not enter. A recurring question among Apple watchers for decades has been, “When is Apple going to introduce a low-cost computer?
Mr. Jobs answered that decades-old complaint by stating, “We don’t know how to build a sub-$500 computer that is not a piece of junk.” He argued instead that the company’s mission was to add more value for customers at current price points.
However, he gave a more nuanced answer to the question of whether Apple plans to jump into the “nascent” market for netbooks, essentially restating his comments on the question from last week at the Macbook introduction in Cupertino by saying the company was taking a wait-and-see attitude.
At the same time, he noted that the company already had a powerful entry in the category: the iPhone. (By that standard, Apple is already the dominant netbook manufacturer by orders of magnitude.)
Apple Tops Expectations As iPhone Use Spreads
Analysts think of Apple as a bellwether of the consumer electronics industry that should be showing early effects of a slowing consumer economy. The company said Tuesday, however, that any slowdown that it detected late in the quarter ended Sept. 30 might just as well have been caused by customers who were choosing to delay purchases for the new Macintosh portables that were introduced last week.
Apple had strong sales in all of its major product lines. It also said that it had sold more iPhones in the quarter than it had since the smartphone was introduced in June of last year.
Underscoring the company’s confidence, Apple chief executive Steven P. Jobs participated in the company’s quarterly financial call with analysts for the first time since October 2000. “Some remarkable things are happening, set against the backdrop of the global economic slowdown,” said Mr. Jobs, who stressed several times that he was not an economist. (He said at one point that “your next door neighbor” is as likely to accurately forecast the economic future as an Apple executive.)
However, he did not mince words about the company’s progress in quickly becoming a dominant force in the cellphone industry, even against cellphone makers, like Research in Motion, that cater to corporations. “Apple outsold R.I.M. last quarter,” he said. “R.I.M. is a good company that makes good products and so it is surprising.”
Apple sold about 6.9 million of its iPhone 3G units in its fourth quarter, compared with 6.1 million cellphones for R.I.M., he said. Apple has already surpassed its goal of selling 10 million iPhones during 2008, he said.
The success of the iPhone helped push Apple’s net income up 26 percent, to $1.14 billion, or $1.26 a share, from $904 million, or $1.01 cents a share, last year. Revenue increased 27 percent, to $7.9 billion, from the $6.22 billion recorded a year ago.
The company had guided analysts to expect earnings of $1 a share for the quarter, but industry analysts note that Apple is traditionally conservative in its guidance and expected $1.11 a share.
“This company is on a roll and a very consistent one, where they are gaining market share at two to three times the rate of the PC industry,” said Charles Wolf, a financial analyst at Needham & Company.
The gross profit margin improved to 34.7 percent from 33.6 percent in the year-ago quarter. Apple’s margins are being closely watched, because during its previous quarterly earnings call this summer its executives said that the company was expecting to substantially change its business model in an effort to take away a pricing “umbrella” from its competitors. Analysts have since been expecting the company to lower prices.
The company said that it was still guiding analysts to a margin of about 30 percent during 2009, in part because of the added costs of new manufacturing processes for the aluminum-case laptop computers that it announced last week.
The strong fourth quarter was tempered by a forecast of a first-quarter decline in profit and nearly flat revenue growth. Peter Oppenheimer, Apple’s chief financial officer, said that, "Looking ahead, visibility is low and forecasting is challenging, and as a result we are going to be prudent in predicting the December quarter.”
He advised analysts to expect revenue for the first quarter of $9 billion to $10 billion and net income of $1.06 to $1.35 a share. In the first quarter of fiscal 2008 the company reported revenue of $9.6 billion and net income a share of $1.76. Apple always makes conservative forecasts, but even so, this clearly suggests it anticipates a slowdown.
Apple’s stock dropped $6.95, or about 7 percent, Tuesday to close at $91.49 before the financial results were announced. However, in after-hours trading, shares were up 13 percent, a gain of around $12. Apple’s 52-week high was $202.96, but the company has been under pressure from Wall Street recently after several analysts said they believed the company would suffer along with the consumer economy from the credit crisis and recent stock market downturn.
Apple said it shipped 2.6 million Mac computers, representing 21 percent growth over the year-ago quarter when it shipped 2.2 million.
It sold 11 million iPods during the quarter, representing 8 percent growth over the year-ago quarter.
Apple said it ended the year with $25 billion in cash and no debt.
For its 2008 fiscal year, net income was $4.83 billion, or $5.36 a share, on revenue of $32.48 billion.
Apple had strong sales in all of its major product lines. It also said that it had sold more iPhones in the quarter than it had since the smartphone was introduced in June of last year.
Underscoring the company’s confidence, Apple chief executive Steven P. Jobs participated in the company’s quarterly financial call with analysts for the first time since October 2000. “Some remarkable things are happening, set against the backdrop of the global economic slowdown,” said Mr. Jobs, who stressed several times that he was not an economist. (He said at one point that “your next door neighbor” is as likely to accurately forecast the economic future as an Apple executive.)
However, he did not mince words about the company’s progress in quickly becoming a dominant force in the cellphone industry, even against cellphone makers, like Research in Motion, that cater to corporations. “Apple outsold R.I.M. last quarter,” he said. “R.I.M. is a good company that makes good products and so it is surprising.”
Apple sold about 6.9 million of its iPhone 3G units in its fourth quarter, compared with 6.1 million cellphones for R.I.M., he said. Apple has already surpassed its goal of selling 10 million iPhones during 2008, he said.
The success of the iPhone helped push Apple’s net income up 26 percent, to $1.14 billion, or $1.26 a share, from $904 million, or $1.01 cents a share, last year. Revenue increased 27 percent, to $7.9 billion, from the $6.22 billion recorded a year ago.
The company had guided analysts to expect earnings of $1 a share for the quarter, but industry analysts note that Apple is traditionally conservative in its guidance and expected $1.11 a share.
“This company is on a roll and a very consistent one, where they are gaining market share at two to three times the rate of the PC industry,” said Charles Wolf, a financial analyst at Needham & Company.
The gross profit margin improved to 34.7 percent from 33.6 percent in the year-ago quarter. Apple’s margins are being closely watched, because during its previous quarterly earnings call this summer its executives said that the company was expecting to substantially change its business model in an effort to take away a pricing “umbrella” from its competitors. Analysts have since been expecting the company to lower prices.
The company said that it was still guiding analysts to a margin of about 30 percent during 2009, in part because of the added costs of new manufacturing processes for the aluminum-case laptop computers that it announced last week.
The strong fourth quarter was tempered by a forecast of a first-quarter decline in profit and nearly flat revenue growth. Peter Oppenheimer, Apple’s chief financial officer, said that, "Looking ahead, visibility is low and forecasting is challenging, and as a result we are going to be prudent in predicting the December quarter.”
He advised analysts to expect revenue for the first quarter of $9 billion to $10 billion and net income of $1.06 to $1.35 a share. In the first quarter of fiscal 2008 the company reported revenue of $9.6 billion and net income a share of $1.76. Apple always makes conservative forecasts, but even so, this clearly suggests it anticipates a slowdown.
Apple’s stock dropped $6.95, or about 7 percent, Tuesday to close at $91.49 before the financial results were announced. However, in after-hours trading, shares were up 13 percent, a gain of around $12. Apple’s 52-week high was $202.96, but the company has been under pressure from Wall Street recently after several analysts said they believed the company would suffer along with the consumer economy from the credit crisis and recent stock market downturn.
Apple said it shipped 2.6 million Mac computers, representing 21 percent growth over the year-ago quarter when it shipped 2.2 million.
It sold 11 million iPods during the quarter, representing 8 percent growth over the year-ago quarter.
Apple said it ended the year with $25 billion in cash and no debt.
For its 2008 fiscal year, net income was $4.83 billion, or $5.36 a share, on revenue of $32.48 billion.
Yahoo to Cut 10% of Its Work Force
Yahoo said Tuesday that it would lay off at least 10 percent of its 15,000 workers as it tries to bring down its expenses. It said reduced marketing budgets had taken a bite out of its online advertising business, sending its net income for the third quarter tumbling by 64 percent.
The company also lowered its revenue projections for the remainder of the year and said it was too early to make forecasts for 2009.
The results come as strategic moves that Yahoo has been considering, including a search advertising partnership with its rival Google and a merger with Time Warner’s AOL unit, have gotten bogged down, leaving the company with few options but to cut expenses, analysts said.
“They just have to batten down the hatches, lighten the load and ride this thing out,” said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Company. “Hopefully they will make it to the other side with their cash intact, presumably as a smaller and more efficient organization.”
Yahoo executives said events like the Beijing Olympics, the presidential campaign and the financial crisis delivered a surge of viewers to the company’s popular Web sites during the quarter.
However, Yahoo was not able to turn those extra visitors into dollars at the rate it had hoped, they said. The company said it had been especially hurt by a retrenchment among marketers who buy high-priced display ads, one of the mainstays of Yahoo’s business.
In an interview, Jerry Yang, a Yahoo co-founder and its chief executive, said the layoffs were a necessary step that would allow Yahoo to operate more efficiently and weather a downturn.
“Going through layoffs is a very tough thing, but I also think we are doing the right thing by keeping flexibility for the company,” Mr. Yang said.
While the cuts will affect all parts of the company, they will not be uniform, and Yahoo will continue to invest in some important projects, like a new advertising system and a new home page, he said. Yahoo might cut some of its services altogether, he said, but declined to name which projects may be headed for the chopping block.
The goal was to reduce annual expenses by more than $400 million before the end of the year, he said.
Yahoo said revenue rose a sluggish 1 percent to $1.79 billion, from $1.77 billion a year ago. Net revenue, which excludes commissions paid to advertising partners, was $1.32 billion, compared with $1.28 billion a year ago, a 3 percent increase. Analysts expected net revenue to be $1.37 billion.
Net income for the quarter fell to $54 million, or 4 cents a share, from $151 million, or 11 cents a share, a year earlier. Excluding the cost of stock options and other items, income was $123 million, or 9 cents a share, compared with 11 cents a share a year ago, in line with analysts’ forecasts.
Some analysts said that under Mr. Yang, who became chief executive in June 2007, Yahoo has been lurching from crisis to crisis and has been unable to outline a credible turnaround plan. The layoffs are not likely to address some of the problems plaguing Yahoo, which include a loss of market share to Google in Web search and to others in display advertising, they said.
“In our mind, it isn’t solely about cost cutting,” said Derek Brown, an analyst with Cantor Fitzgerald. “Unless the layoffs can lead to more rapid, more creative product introductions or more competitive wins, they won’t move the needle.”
Yahoo cut roughly 1,000 jobs earlier this year, but new hires and small acquisitions since then have left the company with more than 15,000 employees, slightly more than at the beginning of the year.
Many investors say that Mr. Yang’s — and Yahoo’s — most significant mistake was to rebuff a $33-a-share buyout bid from Microsoft in May. Microsoft withdrew its offer after Mr. Yang said it was too low.
Since then, Yahoo signed a search advertising partnership with Google, which was expected to be in place by early October and to bring $250 million to $450 million in additional operating cash flow to Yahoo in the first year. But the deal has been held up by antitrust regulators, who are considering the damage it could do to competition in search advertising, a market that Google dominates.
The time allotted for the review was recently extended. A person briefed on the matter, who agreed to talk on condition of anonymity because of the confidentiality surrounding the inquiry, said lawyers from the companies and the Justice Department were discussing possible limits on the scope of the deal, like a cap on the number of ads that Google could place on Yahoo’s pages.
And Yahoo’s merger talks with AOL have failed to bear fruit.
“We think it is not happening because there is a huge gap on the price,” Mr. Lindsay said. A merger with AOL, which is also struggling, would not necessarily solve Yahoo’s problems, he said, and would require deep cuts at the combined company.
Yahoo’s protracted troubles have disappointed investors who have continued to sell its shares. They closed on Tuesday at $12.07, down nearly 50 percent since the beginning of the year. But shares rose in after-hours trading, following the earnings announcement.
The company also lowered its revenue projections for the remainder of the year and said it was too early to make forecasts for 2009.
The results come as strategic moves that Yahoo has been considering, including a search advertising partnership with its rival Google and a merger with Time Warner’s AOL unit, have gotten bogged down, leaving the company with few options but to cut expenses, analysts said.
“They just have to batten down the hatches, lighten the load and ride this thing out,” said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Company. “Hopefully they will make it to the other side with their cash intact, presumably as a smaller and more efficient organization.”
Yahoo executives said events like the Beijing Olympics, the presidential campaign and the financial crisis delivered a surge of viewers to the company’s popular Web sites during the quarter.
However, Yahoo was not able to turn those extra visitors into dollars at the rate it had hoped, they said. The company said it had been especially hurt by a retrenchment among marketers who buy high-priced display ads, one of the mainstays of Yahoo’s business.
In an interview, Jerry Yang, a Yahoo co-founder and its chief executive, said the layoffs were a necessary step that would allow Yahoo to operate more efficiently and weather a downturn.
“Going through layoffs is a very tough thing, but I also think we are doing the right thing by keeping flexibility for the company,” Mr. Yang said.
While the cuts will affect all parts of the company, they will not be uniform, and Yahoo will continue to invest in some important projects, like a new advertising system and a new home page, he said. Yahoo might cut some of its services altogether, he said, but declined to name which projects may be headed for the chopping block.
The goal was to reduce annual expenses by more than $400 million before the end of the year, he said.
Yahoo said revenue rose a sluggish 1 percent to $1.79 billion, from $1.77 billion a year ago. Net revenue, which excludes commissions paid to advertising partners, was $1.32 billion, compared with $1.28 billion a year ago, a 3 percent increase. Analysts expected net revenue to be $1.37 billion.
Net income for the quarter fell to $54 million, or 4 cents a share, from $151 million, or 11 cents a share, a year earlier. Excluding the cost of stock options and other items, income was $123 million, or 9 cents a share, compared with 11 cents a share a year ago, in line with analysts’ forecasts.
Some analysts said that under Mr. Yang, who became chief executive in June 2007, Yahoo has been lurching from crisis to crisis and has been unable to outline a credible turnaround plan. The layoffs are not likely to address some of the problems plaguing Yahoo, which include a loss of market share to Google in Web search and to others in display advertising, they said.
“In our mind, it isn’t solely about cost cutting,” said Derek Brown, an analyst with Cantor Fitzgerald. “Unless the layoffs can lead to more rapid, more creative product introductions or more competitive wins, they won’t move the needle.”
Yahoo cut roughly 1,000 jobs earlier this year, but new hires and small acquisitions since then have left the company with more than 15,000 employees, slightly more than at the beginning of the year.
Many investors say that Mr. Yang’s — and Yahoo’s — most significant mistake was to rebuff a $33-a-share buyout bid from Microsoft in May. Microsoft withdrew its offer after Mr. Yang said it was too low.
Since then, Yahoo signed a search advertising partnership with Google, which was expected to be in place by early October and to bring $250 million to $450 million in additional operating cash flow to Yahoo in the first year. But the deal has been held up by antitrust regulators, who are considering the damage it could do to competition in search advertising, a market that Google dominates.
The time allotted for the review was recently extended. A person briefed on the matter, who agreed to talk on condition of anonymity because of the confidentiality surrounding the inquiry, said lawyers from the companies and the Justice Department were discussing possible limits on the scope of the deal, like a cap on the number of ads that Google could place on Yahoo’s pages.
And Yahoo’s merger talks with AOL have failed to bear fruit.
“We think it is not happening because there is a huge gap on the price,” Mr. Lindsay said. A merger with AOL, which is also struggling, would not necessarily solve Yahoo’s problems, he said, and would require deep cuts at the combined company.
Yahoo’s protracted troubles have disappointed investors who have continued to sell its shares. They closed on Tuesday at $12.07, down nearly 50 percent since the beginning of the year. But shares rose in after-hours trading, following the earnings announcement.
