Intel tumbles as margins miss

Intel reported second quarter sales that were above analyst projections and higher profits Tuesday citing strength in its chip sales.

But shares of Intel (Charts, Fortune 500), the world's No. 1 chipmaker, fell nearly 4 percent after the bell as it missed expectations for its gross margin, coming in at 46.9 percent, short of its forecast of 48 percent.

Intel said it saw earnings of $1.3 billion, or 22 cents per share (EPS) in the second quarter, including a tax item that boosted EPS by 3 cents per share.

Excluding that charge, the resulting 19-cent-per-share profit figure was in line with analyst expectations.

It earned $885 million, or 15 cents per share, in the same quarter last year.

The company reported revenue of $8.7 billion in the quarter, above estimates of $8.54 billion - and an increase of 8 percent from the prior year's quarter.

"It's a good solid quarter. We're still a little early in the company's turnaround," said Doug Freedman, an analyst with American Technology Research. "The reason the stock is down is because expectations were so high already. We're still early in the company's turnaround."

Intel has recently gained back market share from smaller competitor AMD (Charts, Fortune 500), which is set to announce its second-quarter earnings on Thursday.

"It has been more competitive than we expected this quarter," said Intel CEO Paul S. Otellini on a conference call. "We continue to believe the best defense against price wars is better products."

He said that the company was launching production of its 45 nanometer chips this fall, which should lead to better power efficiency. Intel will also increasingly focus on making chips for mobile Internet devices and consumer electronics, he told analysts.

The company has achieved great cost savings in the quarter after laying off 12,000 employees - or 12 percent of its work force - after announcing its restructuring, he said.

Intel stock is up 30 percent on the year, while AMD's has fallen by 22 percent.

Freedman said the results made him bullish about AMD, which could possibly see a revenue increase similar to Intel's.

Internet radio gets a reprieve

July 15 had been the deadline for a new set of royalty fees to kick in that would have raised rates for some Web-based stations by 300 percent or more. Many stations said they could no longer operate under the new fee structure, and some smaller broadcasters already have shut down.

But months of brinkmanship between Internet radio operators and recording industry representatives ended late last week with little more than a whimper as most stations kept running while negotiations progress toward a workable compromise. SoundExchange, the umbrella organization that collects royalty fees for the recording industry, agreed to continue negotiations on the new rates with hopes of reaching a deal that will please everyone.

Industry analysts believe the dispute, thought by some to be a potential deathknell for Web broadcasting, or streaming as it is often referred, is cooling off toward a mutually beneficial conclusion. They contend the true endgame could be an effort to target only the largest broadcasters while allowing mom-and-pop operators to continue under the previous and less onerous royalty structure.

"It's an interesting situation because SoundExchange has an obligation to maximize the royalties it collects and pays," said Cydney A. Tune, an entertainment and intellectual property lawyer with Pillsbury, Winthrop, Shaw and Pittman in San Francisco. "But it has to be careful because this is a new venue and new space. If you drive these players out of business, you're not going to be collecting any royalties."

Tune said negotiations are the most likely way to end the impasse, as legislation and litigation both look to be ineffective solutions.

Space tourism race heats up

Jim Benson's ship is called the Dream Chaser, and here's the dream he's chasing: a 50 percent profit margin on revenue of $200 million by 2015 from putting tourists into suborbital space.

He also wants to beat the mighty Richard Branson into this market by several months.

That goal may sound as ridiculous as the nascent space tourism business itself, but don't count either out just yet. The FAA sees suborbital flights becoming a $700 million business, with 15,000 passengers a year, by 2021; Benson's boast, then, may be on the conservative side. (Branson's Virgin Galactic says it will start turning a profit in 2011.)

Vacations in outer space

And while Benson, 62, isn't as wealthy or as well-known as Branson, he is a veteran entrepreneur who has already sent products into space.

Benson is the founder and majority shareholder of SpaceDev, which manufactures microsatellites and parts for NASA's Mars rovers. It also helped design the revolutionary engine that powered Burt Rutan's SpaceShipOne, the first commercial spacecraft, into the history books in 2004.

Now Benson and Rutan are rivals, divided by a bitter public feud over who should get credit for that engine. Rutan is building five copies of SpaceShipTwo for the Virgin Galactic venture, which claims that it will be conducting test flights in 2008 and flying passengers in 2009 at $200,000 a pop.

Benson founded Benson Space, based in Poway, Calif., with the express aim of getting there first. In the first five years of operation, he says, he can get the ticket price down to just $50,000.

Benson and Branson represent two radically different ideas about how to get to space. SpaceShipTwo, like its predecessor, rides under the belly of a plane called the White Knight, which slowly gains altitude before its payload takes off.

Branson's next big bet

The Dream Chaser is a bullet-shaped spaceship that launches vertically, based on designs by the U.S. Air Force and NASA. Powered by six of SpaceDev's engines, it will carry tourists to space in just 15 minutes.

Benson says, "You aren't circling around the atmosphere for two and a half hours trying to get altitude before you go to space," as you would be on SpaceShipTwo.

Rutan, for his part, snipes back at the Dream Chaser design. "The most dangerous operation of a rocket is at low altitude, where you can't abort motor operation," he says.

Virgin has a strong lead in the cash race, with $21 million in deposits and bookings for 200 passengers. Rutan's development is funded to the tune of $250 million. As of May, Benson was talking to four billionaires who were each interested in cutting him a $50 million check.

The Dream Chaser's advantage: It's already designed for the next frontier, orbital tourism. Rutan will have to build a new orbital craft, SpaceShipThree. So if Benson doesn't win this round, it's not the end of the race.

Eco-decorators for your home

OK, so you want to cut your energy bill and help save the planet. But how?

Will a wind turbine provide more wattage in your neighborhood than a roof full of solar panels? What about installation costs, state rebates, and federal tax credits? How about just better insulation?

It's enough to make any potential customer's head spin.

Solar power goes portable

That's where Standard Renewable Energy comes in. The year-old startup is rolling out a nationwide service that figures out what combination of green technologies makes the most sense in a given location. The company will audit you for free and then bid to install what it recommends.

Price: roughly $30,000 for homes and $200,000 for businesses. "We sort through the chaos for the consumer," says John Berger, a former Enron energy trader who founded Standard Renewable.

There's plenty of chaos to thrive on.

6 solar technologies to power the world

In Austin, for example, putting solar panels on your roof nets out to about $9,500; in Sag Harbor, N.Y., thanks to more generous local rebates, you can put in both wind and solar systems for that same price.

U.S. consumers and businesses spent $1.2 billion on such installations in 2006, a number set to rise to $2.2 billion in 2008.

Berger thinks he can make $8 million in 2007, with service in six states by the end of the year; in 2008 he expects revenue of $52 million from 15 states.

In the unlikely event that it doesn't work out, Berger has a backup plan: Standard Renewable is also building massive biodiesel refineries with Chevron (Charts, Fortune 500).

A scanner the size of a pen

When I heard about the Docupen RC800, I thought it was a no-brainer. Trade in my flatbed scanner for one the size of a small cigar? Gladly! As the owner of American Roof Preservers (cedarcare.com), a firm that cleans and preserves cedar-shake roofs in Illinois, Indiana and Wisconsin, I could see using the DocuPen to scan documents or collect helpful news articles on the go.

Manufacturer PLANon Systems Solutions (planon.com) advertises the RC800 as a full-color scanner capable of recording 100 pages, each in as little as four seconds. I was excited to test it.

I removed the DocuPen from the box, loaded the bundled software CD onto my computer, and charged the pen for 50 minutes. Then I set DocuPen to scan at its highest resolution with full color, figuring that even though I was scanning a black-and-white document, I wanted the best possible quality. I set the scanner on the page, pushed the power button and rolled the pen toward the bottom.

About three-quarters of the way down the page, all the lights on the scanner began flashing, and it shut off. I repeated the test, but each time the results were the same. Oddly, the software help menu offered only technical specs on the software itself. (Later I realized that there was a second help menu in the separate Paperport document viewer - all a bit too complicated for my taste)

Then I tried uploading. I connected the DocuPen to my PC with a USB cable and pushed a button. But midway through the upload, DocuPen lost its connection to the computer. I tried three different computers, with the same result.

I left a message with tech support and was pleased to get a call back within the hour. The technician told me to close out of the software and restart it. I'm not sure what that did, but it worked. He also confirmed that while the RC800 is a full-color scanner and can scan 100 pages, the two don't go together - in color it scans only about one page.

While I had the technician on the phone, I e-mailed him a PDF of my abortive scan. He confirmed its quality was appropriate. I was surprised. To me, it had the resolution of a garden-variety fax; I would hate to read 100 pages of such blurry type.

I set the DocuPen to black-and-white mode and scanned in 100 pages. At the bottom of each page, two lights blinked when the page had uploaded, and then the scanner shut off. I moved it to the top of the next page and repeated the process.

After I had finished 100 pages, I found that only 90 had been scanned; I'm not sure why that was, and I could find no mention of it in the manual. I also tried scanning a color page in full color. I found that the colors did reproduce accurately, but the image quality was only fair.

New Game Boy coming this year

The company unveiled the Game Boy Micro Tuesday, a smaller, lighter version of its most popular system. Measuring just four inches wide, two inches tall and less than an inch deep, the Micro weighs just 2.8 ounces, roughly the same as 80 paper clips. The machine will go on sale this fall. The company did not announce a sale price.

"This is not a new technology," said Reggie Fils-Aime, executive vice president at Nintendo of America. "It is a new look in that it has the best and brightest screen we've ever put in a handheld. It's also a new look in that no matter how tight your jeans are, it will still fit in your pocket."

The Micro will also be more customizable than previous versions of the Game Boy, with a removeable face plate, much like today's cell phones.

Nintendo hopes the Micro will help it maintain its leadership position in the handheld gaming space. The Game Boy (in all of its various forms) has sold over 177 million units since it was first introduced in 1989. The Game Boy Advance has sold over 28 million units in North America alone.

Previous competitors, including the Atari Lynx and Sega Game Gear, have fallen by the wayside, but the arrival of Sony's (Research) PSP may have changed the battle.

Released in March to critical acclaim, the PSP has not been quite as big a hit with consumers as some expected, likely due to its $250 price tag. Still, analysts expect the company to sell more than 7 million units worldwide by the end of 2005.

This will be the third handheld gaming system in as many years for Nintendo. Last year's Nintendo DS was a hot holiday gift, selling 500,000 units in its first seven days on store shelves. (Globally, more than 5 million DS units have sold.)

Ultramobile PCs

Sony Vaio VGN-UX390N

Size: 3.7 x 5.9 in.; Weight: 1.2 lb.; $2,500; www.sonystyle.com

31/2 stars

PROS Sony's technical wizardry shines in the new Vaio VGN-UX390N, which is the most feature-rich of this group. It has two built-in cameras, a fingerprint scanner, and a 32GB solid-state flash memory drive (SSD) that's faster and more durable than a traditional hard drive and lasts longer on a charge. The UX390N also has the brightest and sharpest screen of the bunch and uses Edge cellular technology (a close second to EVDO) for connecting to the Web when Wi-Fi isn't available.

CONS While the 4.5-inch screen is sharp, the small text can strain your eyes, and the keys are spaced far enough apart to make typing uncomfortable.

Samsung Q1P SSD

Size: 5.5 x 9.0 in.; Weight: 1.7 lb.; $2,000; www.samsung.com

3 stars

PROS Samsung takes a different approach to mobile computing--and it works with the Q1P. It dodges the dumb thumb issue with a glorious 7-inch touch- screen that's easy to use as a virtual keyboard or a template for scribbling notes. (The handwriting recognition is phenomenal.) The Q1P comes with a 32GB SSD as well as AVStation Now software for fast access to music, photos, and movies. Add the optional organizer case and a portable USB keyboard and you have the next best thing to a standard notebook.

CONS The Q1P is the bulkiest of the bunch, and Wi-Fi and Bluetooth are your only options for wireless Internet.

Could HP's AMD laptop sway Dell?

The up-to-now immovable object of Intel chips in Dell computers may have met an irresistible force in a new laptop from each company's closest rival, an analyst says.

This week Hewlett-Packard and Advanced Micro Devices began taking orders for their joint effort, the Compaq nx6125 notebook, and as soon as they did, analysts began talking about a potential shift in the balance of power in the PC world.

"This is a huge win for AMD," said Sam Bhavnani, a senior analyst with Current Analysis. "This will impact mostly small-business purchases. The large enterprises will not shift from Intel to AMD in the near term. However, any small or medium-sized business that is in a replacement cycle now has to consider the Turion 64 HP option."

So, if nx6125 notebooks start selling like hotcakes, will that finally persuade Dell it needs to sell AMD-infused products along with its Intel-based lineup, despite its history of offering only Intel inside? Bhavnani seems enthusiastic.

"It will make it a viable concern for Dell if HP begins to make money off of this new Compaq," Bhavnani said. "Dell is all about the numbers, and if they are looking at AMD, their main question will be, will AMD give us the volumes that we require?"

The analyst also notes that if Dell were to take on a Turion processor, it would more than likely be for its consumer Inspiron laptops, rather than its business-focused Latitude products.

A Dell representative declined to comment on the possibility of the company straying from its Intel heritage.

HP has been under growing pressure during the last year, as Gateway has re-entered the market and Dell continues to drop its PC prices, says Current Analysis researcher Nicole D'Onofrio.

The nx6125 marks the first time HP has offered a business-class computer with AMD's Turion processor. The chip was specifically designed for laptops that can run current 32-bit instruction programs, as well as the next generation of 64-bit instruction software.

The new Compaq is also significant for HP in that it is the first time the company has produced a sub-$1,000 notebook with a built-in biometric fingerprint sensor and an optional smart card reader.

The other motivation for Dell to adopt AMD's Turion, Bhavnani surmises, is that customers who purchase a notebook based on the AMD Turion 64 processor, like HP's, will not have to buy a new computer when Longhorn, Microsoft's next version of Windows, ships.

Do you need a $2,600 tablet PC?

As the peripatetic CEO of Enspire Learning, a business training company, I depend on my laptop to stay productive and connected during business trips. So I was excited to test Toshiba's new Portégé R400 tablet PC, one of the first Vista-powered tablets to hit the market.

The Portégé is light (less than four pounds) and nicely designed, with a thin profile and a sleek black-and-white chassis done in high-impact plastic.

One unusual feature is a tiny display on the front edge of the computer. Powered by Microsoft's (Charts) new Active Notifications system, the display flags e-mail traffic, calendar appointments and the like while the computer is powered down and closed.

It periodically turns on the machine, checks e-mail using a broadband wireless card and displays the sender and subject lines. I was able to use this system in meetings, in a cab and at dinner with out-of-town friends. However, Active Notifications is no substitute for a handheld e-mail device. (For one thing, it displays only the first few words of the subject line.)

Performance is under-whelming for such an expensive machine ($2,599, base). The Portégé ships with a midrange 1.2-giga-hertz Intel Core Duo processor and a rather skimpy 80-gigabyte hard drive. The internal battery lasted a bit less than three hours in my tests, which I find is about average for most notebooks nowadays.

The 12.1-inch backlit display automatically switches from landscape mode to portrait mode once the PC is converted into a tablet. But while the widescreen aspect ratio may be great for watching movies, it felt as if I had a lot less vertical screen real estate in which to do my work. That's a problem because I normally keep around four applications open at the same time.

Nor did I love the keyboard: The keys are smaller, more crammed together, and more sensitive to accidental tapping than those on my admittedly heavier Dell (Charts) Latitude D610.

The R400 handles awkwardly in tablet mode. Toshiba's predecessor tablet, the M400, had a rubbery strip across the bottom that made it easier to hold. The R400 also has sharper edges than the M400, making it uncomfortable to carry from meeting to meeting.

Finally, the stylus is short and difficult to grip. I felt as if I were drawing with an eraser on a rubber surface, not writing with a sharpened pen on a pad.

Nintendo Wii: Funny name, fun system

If nothing else, you have to give Nintendo points for courage. When competitors decided to zig as the next generation of video game systems came along, Nintendo zagged -- and that gutsy decision may well give it an enormous market share boost in the coming years.

The Wii, which goes on sale Sunday, Nov. 19 for $250, is not a graphical tour de force. It doesn't support high-definition graphics. And forget about HD-DVD or Blu-Ray; this thing doesn't even play current generation DVDs (for now at least - a second version will be released next year). But it does make the gaming industry more accessible to those it unintentionally excluded before. Briefly put: The Wii is one of those rare video game machines that's worth trying to pick up during its first holiday season.

That, of course, will be easier said than done. Hardcore gamers will be fighting hard to get one early. But if you do manage to find one, grab it. The price is considerably lower than what Sony (Charts) and Microsoft (Charts) are charging for their new offerings -- and the system is one the entire family will enjoy.

By now, you probably know the Wii's big hook: the controller. Instead of having to struggle with dual thumbsticks and a myriad of buttons, the Wii controls games with a simple device that resembles a remote control. The wireless unit, using internal sensors, translates your wrist and hand movements into onscreen actions. For example, if you're playing a baseball game, you'll swing the control like a bat. Tennis? Wave it like a racket. A shooter? Aim it at the onscreen target and pull the trigger. (A sensor bar subtly sits atop or below your TV to capture your movements.)

While it's easier for gaming neophytes to grasp conceptually, don't make the mistake of thinking the controller is something you can instantly master. Your first instinct when you start playing Wii games is to make big, broad movements. Doing so might feel satisfying, but will lose you the game fast. The trick is to teach yourself to move a bit more subtly.

Physically, the controller's smaller than you might expect. It's also lighter. But most importantly, it's extremely comfortable. Maybe it's because we're all used to holding remote controls at this point - but the hand cramps that can accompany traditional controllers aren't an issue with the 'Wiimote'. And since you'll be holding and waving this thing for potentially long periods, it's particularly welcome.

The controller also houses a small speaker, which can either offer audio clues to players or deepen the immersion factor (by simulating the crack of the bat in a baseball game, for instance).

One thing to keep in mind, though: You only get one controller with the system - and to really enjoy the Wii, you need to play with someone else. To pick up an extra controller (and Nunchuck attachment, which is required in many games), be prepared to shell out an extra $65.

It's all about the games

Of course, technology only reaches so far. If the games aren't fun, then the system isn't either.

Nintendo and its publishing partners are casting a wide net in their effort to bring in new customers, putting out a broad range of games during the launch window (defined as the period up to the end of 2006). Nintendo's own "The Legend of Zelda: Twilight Princess" is the crown jewel - and will likely command the most sales, but there are plenty of options.

Electronic Arts (Charts) offers a new way to play "Madden" (along with other sports franchises). Activision (Charts) will bring its latest "Call of Duty" and "Tony Hawk" games to the system. THQ (Charts) keeps its focus squarely on children with "Sponge Bob Square Pants" and "Cars" titles. And Atlus Software will let you use your Wii controller as a virtual forceps, defibrillator and more in "Trauma Center: Second Opinion".

On top of all of this, the Wii comes with a game ("Wii Sports") included in its retail package, something that has become a rarity in the industry. It's a title that ties in well with the Wii's mission of luring new players. Its mix of short baseball, bowling, tennis, boxing and golf games are simple to grasp and fun to play. (For more thoughts on the Wii launch games, read our review.)

You'll also be able to download and purchase games for older Nintendo systems with the Wii via what's called the "Virtual Console". However, we were unable to test this feature, as the service will not be enabled until the 19th.

One important note: Graphics aren't great on Wii games. In fact, they're generally on par with current generation systems, but Nintendo's betting that won't be a factor. If anything comes back to haunt them as we move later into this cycle in the industry, it will be graphical quality. For now, though, the innovative controls more than make up for the difference.

Beyond gaming, the Wii is Nintendo's first push to become a multimedia device, though it's going about this differently than the competition as well. Rather than acting as a DVD player, the Wii utilizes a broadband connection to let readers keep up with the latest news headlines and local forecast. Users will also be able to type out notes to each other in a rough approximation of email (though typing is a rather clunky process). (As with the Virtual Console, we were unable to test these features.)

Additionally, the Wii has a slot for SD memory cards, allowing you to display pictures from your digital camera or cell phone. Beyond the typical slideshow capabilities, you're also able to doctor photos, adding text and pre-set images (such as sunglasses, snowflakes, etc.) and playing with image type. No changes are saved to your actual photos, so you don't need to worry about permanently altering the shots of Aunt Sally's 50th birthday. You're also able to make puzzles out of your photos, which is a fun twist.

The biggest frustration is the Wii doesn't let you play games against your friends online out of the box. Nintendo is still working on the development software to offer what it feels is the optimal experience, but says the functionality is on the way. (It has not given any sort of timeline for this, however.)

It's a minor quibble - one that will bother hardcore gamers a lot more than the casual and new players that are Nintendo's chief focus this generation.

With the Wii, a new type of gaming system has hit the industry. If the Xbox 360 and PS3 are Lamborghinis, the Wii is a Mini Cooper. It will never win a speed race. It will never be the flashiest. But it's something that appeals to people who might not take notice otherwise - and it's a heck of a lot of fun.

Sony scores with new PS3

Despite the delays, the shortages, the unprecedented high price - $599 for the premium 60-gigabyte model, assuming you can find one - and the small number of available high-definition games that take advantage of its powerful new Cell processor, the PS3 sets new standards not just for video game play but also for multimedia entertainment in the digital era.

It also reaffirms that Sony (Charts) is still at the top of its game when it comes to designing advanced technology in stylish packages. Sleek and gleaming black, it blends in with the most sophisticated of living-room home-theater systems, which sets it apart from the alien designs of its two main competitors, the Microsoft (Charts) Xbox 360 and the new Nintendo (Charts) Wii.

In the ongoing DVD format war, it also gives a huge boost to Sony's push to make the Blu-ray Disc the dominant standard for high-definition DVD players and movie titles (over rival HD-DVD), since the PS3 becomes, for now, the least expensive Blu-ray player on the market.

Sony needs a home run with the PS3

That said, the big questions - which third-generation video game console is best and which one will most delight you or your kids this holiday season - are still open to debate.

The Xbox 360 has a full year's headstart on the PS3 and Wii, which means it has more third-generation games available for it, and Microsoft has recently added new bells and whistles like an optional HD-DVD player and full-length movie and TV downloads in high-definition.

The Wii can't match the PS3 or the Xbox 360 in terms of realistic graphics or movie playback, but it is significantly cheaper ($250), has its own set of innovative technologies and will appeal to families whose idea of fun does not necessarily entail eviscerating alien monsters.

In terms of technical firepower, the PS3 and the Xbox 360 appear to be in a dead heat. The Xbox 360 excels at online game play and has millions of Xbox Live customers already. Sony's PS3 online game network had not yet been switched on at the time of this writing.

Technical propellerheads argue over which system, Sony's or Microsoft's, is the most advanced. In my view, Sony's Cell processor and its integrated Blu-ray DVD drive are superior to the Xbox 360's PowerPC chip and optional HD-DVD drive.

It will take software developers a long time to harness the full power of the Cell chip and the greater capacity of the Blu-ray Disc, so Sony's technical advantage over the Xbox 360 won't be apparent immediately.

Sony had claimed that the PS3 was backward-compatible with all games - some 16,000 in total - written for the previous PlayStation and PS2 game consoles. It turns out that not all older games will play properly on the new system, but most will.

Sony has endured what Elizabeth II once called an annus horribilis, a year of misery, what with exploding batteries, imploding profits and all the PS3-related delays, supply problems and griping over high prices. But Sony's engineers and designers have reason to be proud: The PS3 is well worth the money and well worth waiting for.

Do you answer your cellphone during sex?

People are becoming increasingly dependent on their cellphones. According to Dan Schulman, CEO of cell operator Virgin Mobile, one in five will interrupt sex to answer their phone.

That was just one surprising insight from an intense 25-person seminar on "The Mobile Generation" at the Aspen Institute in August, with Schulman and other top thinkers.

Much of the discussion focused on how quickly young people worldwide are migrating to mobile communications and integrating them into their lives.

"People leave a movie and text each other, and then text each other again before they go to sleep," said Jerry Murdock, a venture capitalist with Insight Venture Partners. "This is something new - maintaining an ongoing dialogue with someone wherever you are." He says we are entering an era of what he calls "co-presence."

"I know a 32-year-old whose boyfriend used SMS to break up with her," recounted John Seely Brown, the emeritus director of Xerox PARC. Responded the other Brown in the room - Shona (no relation) - who is senior vice president for business operations at Google (Charts): "For the record, that's tacky."

There was much discussion about mobile applications of the future. For instance, said Shona Brown: "Someone will pay for pizza with a cellphone, and their friend will use [phone-to-phone] infrared to top off the others' stored value card."

Generation ADD

Esther Dyson, the Internet investor, pundit and author, talked about how great are the opportunities for mobile applications that "foster interaction among people." She added "These devices are present almost all the time. They become almost part of you."

But Dyson is not sanguine about the societal implications of all this. Said she: "I worry about something I call Mental Diabetes Type 2 - a lack of ability to think deeply and in a concentrated fashion over a period of time. We're getting a diet of empty information calories that's over-processed, over-sugared, too bite-sized and way too appealing."

Added Dipchand Nishar, who oversees Google's wireless efforts: "We had Generation X and Generation Y. Now we have Generation ADD."

Others - notably Murdock and Schulman - were less worried, saying that mobile phones and computers were leading kids to have more friends and more social interaction, which probably is a good thing.

The notion that the mobile phone or its heirs will eventually replace the PC was roundly rejected by many of those present. "That's a myth," said Nishar. He said that the average use of a phone today is about 4 minutes, whereas the average PC data session is around two hours.

Much discussion was devoted to how wireless mobility is changing advertising. Schulman said that Virgin Mobile enables its customers - mostly young people - to opt in to watch commercials in exchange for free minutes. "We've been shocked at how many signed up," he said. "For them it's just entertainment." Advertisers participating in the program include Pepsi and Xbox.

Finding the next billion

Despite the fact that more than two billion people worldwide already have cellphones, everyone agreed the growth opportunities are massive. "Most people are still not connected," said Padmasree Warrior, CTO of Motorola (Charts).

The design challenges to reach the unconnected are great, she said. "The next billion are in China and India and places like that. And many of them can't type or even read."

But Mircea Dan Geoana, the chairman of the foreign relations committee of the Romanian Senate, said that in his relatively poor country of 22 million there are already 10 million mobile phone subscribers.

Kamal Qadir is CEO of CellBazaar, a Bangladeshi company which operates an online Craigslist-like buying-and-selling service that rural businesspeople access exclusively over mobile phones. His company charges nothing for the service, making its money by sharing the revenues that cell carrier Grameen Telecom, the country's largest, gets from carrying the calls.

Said he: "One study showed that more than 40 percent of rural cellphone use in Asia is for business." It was the kind of expectation-confounding comment that characterized the entire three days.

With wireless users growing rapidly and many cellphones built with processing power comparable to 1998 PCs, this crowd presumes that mobile connectivity will continue to dramatically change all our lives.

Gifts for the video game elite

I've always taken great pride in finding just the right holiday gift for people, but it's proving to be a challenge with those darn video game executives I've got on my list. I mean, these are the people who are in charge of the PlayStation 3, the Xbox 360 and the Nintendo Wii. They know from good gifts!

Take Nintendo president Reggie Fils-Aime. Reggie made himself known in the gaming world two years ago by declaring at a press event he was about kicking ass and taking names. Trust me - he is NOT someone you want to buy the wrong present for.

But see, Reggie does things differently than most people. (It goes beyond the Wii's unique play style, too. This is a man who bobsleds to work, even in the summer. And where you or I might have a dog, he's got a pet Wolverine - named Kirby.) That's why I'll be picking him up an Entertaible.

Made by Philips, this quirky table blends board and video games - and it's meant to be used by several people simultaneously. It's centered around a 30-inch LCD touch screen (which Reggie should love, since he leads the charge on Nintendo's "Touch Generation" campaign).

Philips (Charts) says the device will let players use real world objects to manipulate the virtual world. Imagine a soccer game, where you use a physical pawn to boot a computer generated ball around a field onscreen.

The price, which Philips didn't give, is bound to be high, but that's the least of my worries. The trick is going to be finding an Entertaible. The system is just set to begin pilot testing at bars and restaurants, though the company won't say where. Never fear, Reggie, I'll keep looking!

Now the easiest video game exec to buy for - hands down - is Microsoft's (Charts) Peter Moore. Peter, you might not know, holds the world high score for "Burgertime". He simply can't get enough of those old school games. (Doubt it? Take a look at the number of classic games on Xbox Live Arcade.)

So when I saw Dream Arcades' 100-inch home video arcade center, I grabbed it. With over 125 games pre-installed, including "Centipede," "Pac Man" and the ever-popular "Sinstar," this is a literal smorgasbord of classic gaming. And the 100-inch screen will make you quickly forget the paltry displays of the quarter gobblers from the 1980s.

It's even wireless - which is a big thing in Xbox-land these days. And the added light-gun is just plain cool. (Hey, how else are you going to recreate the "House of the Dead III" playing experience in your pad?)

At $4,500, it's just a drop in the bucket. But Peter, this gift comes with a condition. You've got to invite me over so we can finally settle - once and for all - which of us is the better player at "Root Beer Tapper".

Then there's Kaz Hirai over at Sony (Charts).

Appearance is important to Kaz, both personally and professionally. He's always impeccably dressed and there's no disputing that his PS3 puts out some sharp pictures. He also likes to think big.

So I think he's going to like the 103-inch plasma TV I've picked up for him. Measuring roughly 7.5 feet by 4.2 feet, this monster has a 1920 by 1080 resolution, so it'll be a good showcase for the PS3's games and Blu-Ray movies.

The price tag is a steep $70,000, but since it will serve as both a holiday present and a congratulatory gift for his recent promotion, I'm not worried. I just hope that when he has me over next, he won't make me watch his home movies on it. (Kaz loves to show those home movies.)

I also hope that he won't notice the TV's from Panasonic (Charts) - and not Sony.

There's one thing that disturbs me, though. Even though it's the season of peace and joy, my three gaming executive buddies have been saying some mean things about each others' companies for the last few months. It's the sort of thing that would make Santa weep.

Since they're all gamers, I think the best solution is to invite them my holiday party aboard the Gamer Bus in Virginia. This 37 foot RV comes with 16 23-inch HDTVs and some comfy chairs to relax in. Kaz and Reggie might be a bit upset that the Bus only has Xbox 360s in it, but I suspect they'll get over it.

After all, as with all of my parties, I'll be inviting my beloved Angie Harmon to join. And if they want to beat Angie and me in some multiplayer "Gears of War," these three execs are going to have to work together.

Intel v. AMD: The joy of blood feuds

Trying to disentangle the endless competing technical claims made by Intel and AMD about their microprocessors is like refereeing a shouting match in a high school hallway. "That is such bulls---!" said one company's spokesman when told of the other's arguments. "They're scared s---less, and they should be!" fired back someone from the other company.

That is what writing about computer chips has come to - figuring out who is least likely to be lying. But believe it or not, that's a good thing, because it means that real competition has finally arrived.

For two decades Intel (Charts) overwhelmingly dominated the business. AMD (Charts) was like Wile E. Coyote, repeatedly poised to deal a powerful blow but always confounded at the last second by the fleet-footed Road Runner (Meep meep!). In 2003, however, AMD finally found some dynamite that worked: the Opteron, a chip for servers that Intel couldn't match.

AMD warns on revenue, stock tumbles

For about two years AMD held a clear performance lead, which enabled it to enlist all the major computer manufacturers as customers - first IBM (Charts), then Hewlett-Packard (Charts), Sun (Charts) and finally, last year, the longest holdout, Dell (Charts). Its market share in servers, which was approximately zilch when Opteron debuted, crept steadily up to around 22 percent by the end of 2006, according to Mercury Research.

Since servers are where the most money (and industry glory) is made in the processor business, this was a very big deal. Meanwhile, Intel embarked on a painstaking process of imitation and by last year, after much internal Sturm und Drang, the company concocted product that matched much of what AMD achieved with Opteron.

Then late last year Intel reestablished its speed cred when it trumped AMD and shipped a chip called Clovertown, the first microprocessor with four computing engines, or "cores." ("Quad-core computing" is impenetrably complicated. To understand how the two companies' approaches compare, you have to factor in not only raw speed, Intel's favorite measure, but also things like performance per watt of electricity used, to which AMD is partial. Suffice it to say that both chipmakers have their strengths.)

Intel CEO Paul Otellini pointedly declared in public that for Intel it was about "bragging rights." He got them. For the first time in several years Intel started regaining server market share and accelerated the process by radically lowering prices. That hurt Intel's margins - but also grievously wounded AMD, which started losing big bucks. Its stock plummeted; Intel's rose. It was struck another blow Monday when it announced it would fall short of this quarter's revenue guidance.

AMD, you'll be non-shocked to learn, hasn't just been sitting around waiting for the next flying head kick from Intel; it too has been tinkering behind the scenes. By early fall it will release its most important new chip since Opteron, the quad-core code-named Barcelona. Randy Allen, who heads AMD's server business, claims Barcelona's performance will be about 40 percent better than Clovertown's. Whether or not that's an exaggeration (outside experts seem to think it isn't), Intel will respond in due course. And then AMD will. Then Intel. AMD. Intel. And so it goes.

The consensus among customers and analysts is that the overall playing field is now, perhaps for the first time ever, truly level. AMD is here to stay. "These are two well-matched players on their game," says the respected processor analyst Nathan Brookwood. "Which is weird when you consider the far greater resources that Intel can bring to bear."

Intel steps up chip race with AMD

"Technically, we view AMD and Intel as peers," says Greg Papadopoulos, chief technology officer at Sun Microsystems, which will soon sell servers based on chips from both companies. "Intel has engineering depth. AMD has focus."

The surest sign that AMD had come of age was when Intel stopped pretending it had nothing to worry about - and began letting its animus show. At a big Intel technical show last year, for example, senior vice president Pat Gelsinger logged on to a computer onstage. A huge screen showed his password: I HATE AMD.

Do we have to separate these two? Absolutely not. The more the fighting, the better the chips. As far as customers - which means all of us - are concerned, happiness is a nice brawl.

Tech's biggest trend: everywhere

It can't be said too often, because so few people even still understand its gravity: The adoption of technology in the developing world is tech's biggest trend. A new report by Forrester Research predicts there will be 2.25 billion PCs in the world by 2015, up from 755 million today. The vast majority of that growth will come in places like China, India, Brazil and Eastern Europe.

This growth has implications for everyone developing technology, whether chips, devices, software, or Internet and communications services. If you want to go where the growth is, you have to think about the developing world. But in many cases this will mean a complete reset of business models, towards lower costs, higher volumes and ever-easier user interfaces. Writes study author Simon Yates: "Reaching these users in a cost-effective manner with technology that is relevant to their lives requires a fundamental shift in the way computer hardware and software is designed, assembled, financed, and distributed."

While that will prove hard for many companies, those who resist will risk marginalization, simply because the products that achieve volumes in the billions are likely to dominate the entire world's market. At larger volumes products can be both better and cheaper, as they benefit from ever-increasing economies of scale. Says Al Hammond of the World Resources Institute, one of the top experts on the developing world and technology: "In 10 years, technology will be completely transformed by the developing markets."

Hammond says that every time he visits a cyber-café in the developing world there are lines of people waiting. In one small Vietnam city he visits regularly, he says there are more than 50 cyber-cafes.

The Forrester study points to several big initiatives of major tech companies that will contribute to the coming surge in PC sales, some of which I've covered recently in this column. The so-called $100 laptop project of the One Laptop Per Child group (OLPC), expected to cost about $175 when it starts shipping in volume this fall, is most prominent.

But Intel (Charts, Fortune 500), which OLPC's Nicholas Negroponte insists on casting in the role of bad guy, is itself pushing forward with a raft of initiatives to lower the cost of computers, make them smaller, and make them more suitable for students in developing countries. Even in the weeks since I last wrote about Intel's efforts, it has started talking about yet another major project much like OLPC's called the Eee, expected to cost about $200. Meanwhile, Intel rival (and OLPC supplier) AMD (Charts, Fortune 500) has its own project (called 50x15) to get 50 percent of the world's population onto the Internet by 2015.

As these efforts, especially Intel's, suggest, though we may exceed two billion PCs by 2015, what a PC will be then will in many cases look more like today's cell phones and PDAs, even though they will do all that today's PCs can do and more.

Microsoft (Charts, Fortune 500) has taken a historic step toward making affordable software available for all these machines, especially for the hundreds of millions that will be bought for students. Its Student Innovation Suite, announced in Beijing in April, includes versions of Windows and Office plus special software for math and e-mail, will cost governments only $3 when they buy it for students.

Forrester says that system makers like Hewlett-Packard (Charts, Fortune 500), Dell (Charts, Fortune 500), Acer, Lenovo and Toshiba must step up more than they have so far to both hasten and take advantage of this opportunity. Writes Forrester's Yates: "There is nothing more important to the long-term health of the ecosystem of personal computing hardware and software vendors than a successful strategy for emerging markets." It's where the growth is, it's where the competition will come from, and it's where companies will define their image as the industry evolves.

Already the impact of accelerating growth in the developing world is being felt in unexpected parts of technology. For instance, Friendster, the pioneering social network, now claims more than 40 million members, but the majority of them are in just a few countries in Southeast Asia.

In Hammond's opinion, the killer app - at least macroeconomically - for the next phase of developing world computing may be online education, and not just for kids. It could come from people learning English using their cell phone or portable Internet device while standing in line at a bus stop, for instance. "Imagine if a real global knowledge market were to develop," he says. "That would be profound."

Some of Forrester's predictions for the coming surge in computing are stunning. China, for instance, will leap from about 55 million PCs today to 500 million by 2015. India will add 156 million new PCs. The Middle East and Africa will add 110 million. Iran, with 8 million PCs today, should reach a total of 40 million. Latin America will add 171 million, Eastern Europe 85 million.

Of course the real numbers are impossible to predict and Forrester uses its own complex models to come up with those estimates. The study points out that the last time Forrester surveyed global PC growth, in 2004, the debate in the industry was over whether we would reach one billion PCs by 2010. With that target to be surpassed in 2008, these new numbers seem clearly in the ballpark.

The message is clear and unmistakable: Start paying attention now to what's happening with tech in the developing world.