The Future of Quake, Rage, and id Software

Quake-Con 2013 is happening in Dallas, Texas this weekend, but there is, and has been for many years, a noticeable absence of Quake. IGN asked developer id Software’s studio director Tim Willits for a status report on the legendary shooter franchise.

“The brand is critically important to us. I don’t know what we’re going to do, but we’re not going to forget about it.”

Bethesda’s VP of marketing, Pete Hines, shrugs, smiles, and elaborates, “It’s a franchise we should make a really good game for at some point. But we aren’t officially talking about what id is up to.” Hines says Quake is “still on our radar, and it’s something the id guys talk about. Like, when, or how, or by who? I don’t know. We’ll see. But there’s nothing that we have where it’s like, ‘No, we’re never doing another one of those.’ Everything has possibilities.”

By who? id Software already outsourced its famous Wolfenstein series to Machine Games, developer of Wolfenstein: The New Order. A similar thing could happen for Quake in the next generation, perhaps, and it’s something Willits says could keep Rage going.

“The [Rage] franchise is not dead,” Willits says. “But I don’t know what we’re going to do with it.” The developer is already deep into development of a new project after Doom 4’s troubled production started over. “There are lots of opportunities, or for someone to license it,” he continues. “We always keep our eyes open for developers. Maybe a hot developer comes down the line to do something and we want to work with them. We don’t have anyone right now, but that’s a possibility.”

id hasn’t “had that conversation” in an official capacity yet, Willits clarifies. “It’s not really a conscious decision, but it’s a logical thing. It could happen.”

What definitively won’t happen, Willits says, is starting something completely new. With so much else going on, like the desire to see a new Quake, to fix Doom, to bring Rage back, Willits says “I know we’re not going to do another new IP.”

Mitch Dyer is an Associate Editor at IGN. He’s also quite Canadian. Read his ramblings on Twitter and follow him on IGN.

New Habits Transform Software

They are not using these objects, of course, but clicking on the pictures of them in popular word-processing programs like Microsoft Word or Google Docs. The icons linger like vestigial organs of an old-style office, 31 years after I.B.M.’s personal computer brought work into the software age. They symbolize an old style of office software, built for the time when the desktop computer was new and unfamiliar.

But no longer are workers tethered to a desk, or even to an office; we are all toting around laptops, tablets and smartphones to make every place a workplace. And so office software is changing. These days, what is important is collaboration, small screens, fast turnarounds, social media and, most of all, mobility.

“The way people use things is fundamentally changing,” said Bret Taylor, chief executive of Quip, a start-up offering document-writing software that focuses more on mobile than desktop work.

Mr. Taylor, 33, is one of the best-regarded young software engineers in Silicon Valley. He helped create Google Maps before serving as Facebook’s chief technical officer. His co-founder, Kevin Gibbs, also 33, helped create Google’s data centers and as a side project developed the software that suggests completions when people start to type questions into Google search.

Their company is one of several that is developing office software for the mobile world. Some of the new programs still borrow from images of old-fashioned work in their design. But the capabilities they offer are decidedly up-to-date.

Last month Box, an online service for storing documents, pictures and other data, bought Crocodoc, a company that makes it possible to view Microsoft Word documents and other popular file formats across a variety of devices at the right size for whatever screen is being used at the time. Evernote, another online storage outfit, allows people to write, edit and share notes together, instead of e-mailing multiple versions of a Word document to one another.

Sam Schillace, Box’s vice president for engineering, wrote the original program that became Google Docs, which was introduced only six years ago.

He explained that in a mobile world, where everyone is in nearly constant contact, speed and ease of use are more important than lots of font choices. “We were guilty of taking the existing nature of documents,” he said, “but six years ago connectivity was a question. Now everything is connected all the time.”

Both Microsoft and Google are scrambling to make their products reflect a work environment where PCs exist alongside other devices. There is a mobile version of Microsoft Office, which includes Microsoft Word, but it can only be used to edit certain kinds of documents and collaboration is limited. One reason for this, the company says, is that it does not want to force its user base to relearn too much, too quickly.

“We have one billion users of Office,” said Julia White, general manager of Office marketing. “You can’t expect them to change every day.”

Still, social media touches, like “liking” an e-mail to show you’ve read it instead of writing a response, are likely to be seen in the future, she said.

Quip’s product is for now fully available only for Apple’s mobile devices and laptops. It combines instant messaging with document creation, storage and sharing in a primarily touch-screen environment.

Tap an icon of a manila folder and the material inside appears, which any user can organize as they see fit. Tapping one of those documents brings it up to be written, edited or commented on.

Like on Facebook, people’s pictures appear alongside their comments. The pictures also appear on any folder or document a person has open, making it easy to start working with someone else.

This article has been revised to reflect the following correction:

Correction: July 31, 2013

An earlier version of this article misspelled the given name of a Stanford University researcher. He is Mathias Crawford, not Matthias.

State of the Art: Software as a Monthly Rental

Yes, it’s still the program that just about every photographer and designer on earth uses to retouch or even reimagine photos. It’s still the only program whose name is a verb.

But now, Photoshop is also the biggest-name software that you can’t actually buy. You can only rent it, for a month or a year at a time. If you ever stop paying, you keep your files but lose the ability to edit them.

You have to pay $30 a month, or $240 a year, for the privilege of using the latest Photoshop version, called Photoshop CC. Or, if you want to use the full Adobe suite (Illustrator, InDesign, Premiere and so on), you’ll pay $600 a year.

The price list is stunningly complex. The fees may be higher or lower depending on how many programs you rent, whether you already own an existing version and which one, whether you commit to a full year or prefer to rent one month at a time. There are also discounted first-year teaser rates, student/teacher rates and a 30-day free trial.

But you get the point: the dawn of Software as a Subscription is now upon us.

Microsoft is conducting a similar experiment with the latest version of Office. An Office 365 subscription is $100 a year. But there’s a big difference: renting Office is optional. You can still buy it outright if you prefer.

It should be obvious why Adobe is enthusiastic about rental software. First, it’s big money.

Not everybody will pay more than before under the new plan. If you use three or more Adobe programs and you upgrade to the latest versions every year, you’ll save money by renting.

But if you use only one or two programs, you’ll pay much more by renting — especially if you were in the habit of upgrading only every other year, for example. Here’s the math: Photoshop CC alone will cost $240 a year. In the old days, buying the annual upgrade cost $200, and you didn’t have to upgrade every year. In three years, you might have spent $200 or $400; now you’ll pay $720.

And Adobe could raise the rental prices at any time. Every year, if it chooses.

Adobe also benefits because a rental plan helps it cut down on software piracy. Despite its name (CC stands for Creative Cloud), the new software versions are not, in fact, stored online. You still download Photoshop, Illustrator and the other programs and run them from your computer. But the downloaded software checks in with the mother ship every 30 days, over the Internet, to make sure the subscription is up to date. If not, you’re locked out.

Finally, Adobe benefits because it’s no longer committed to a difficult, relentless annual release cycle. There will no longer be a big new version of each Adobe program each year. Instead, Adobe says that it will regularly slip in new features as soon as they’re ready. The company hasn’t decided whether it will ever use numbers again (Photoshop CS4, CS5, CS6), but for now, the name is simply Photoshop CC.

So far, the switch to a rental-only plan may sound like a rotten deal for many creative people, especially small operators on a budget. And, indeed, many of them are horrified by the switch. A touching but entirely hopeless petition (j.mp/1aynMtK) has 35,000 signatures so far. (“We want you to restart development for Adobe Creative Suite 7 and all future Creative Suites,” it says. “Do it for the freelancers. For the small businesses. For the average consumer.”)

Adobe, however, points out that rental customers gain vast advantages over the old “you buy it” system. The big one, of course, is that perpetual refinement principle. You’ll always be up to date with software that’s constantly improving.

Adobe also points out that subscribing to Photoshop gets you more than just the right to download the software. The subscription comes with access to Behance, an online portfolio where you can display your Adobe-created documents and read admiring comments from fellow creative types. You also get 20 gigabytes of online storage for files, Dropbox style, so you can work on them wherever you happen to be.

Another perk: As before, you can use your rented programs simultaneously on two computers — but now, one can be a Mac and one can be a Windows machine.

Bits Blog: A Software Feud Ends, at Least for Today

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Chinese Firm Is Charged in Theft of Turbine Software

The indictment by a federal grand jury in Madison, Wis., outlined actions that the Chinese firm, Sinovel, took against AMSC, formerly the American Superconductor Corporation, and represents the latest skirmish in a series of trade disputes between the United States and China involving renewable energy.

AMSC said the theft in 2011 led to the loss of 500 jobs and cited the damages as lost sales and trade secrets.

The two Chinese executives are in China, and the former employee, who was working for AMSC in Austria, has returned home to Serbia, according to John W. Vaudreuil, the United States attorney. He said that the United States did not have extradition treaties with either nation, but the accused could be arrested if they traveled to a country with which the United States does have an extradition treaty.

Sinovel will face a trial here, he said, and could face fines equal to twice the damages, plus restitution to AMSC.

The employee, Dejan Karabasevic, 40, served a brief prison term in Austria related to the case, Mr. Vaudreuil said. According to the indictment, after Mr. Karabasevic quit AMSC, he was offered a lucrative contract to work for a Chinese turbine blade factory, apparently to disguise the nature of the payment to him.

The indictment is a small vindication for AMSC, which has been pursuing claims against Sinovel, a former customer, in China. AMSC says that after Sinovel stole the software, it refused delivery of merchandise it had ordered, worth more than $700 million. It is seeking $70 million in arbitration in that case. It is also suing in China for $450 million for infringement of trade secrets.

Matthew J. Jacobs, a lawyer at Vinson & Elkins, which represents Sinovel, said that he had no immediate comment. When AMSC filed for arbitration in Beijing, Sinovel filed a counterclaim for $58 million, accusing it of breach of contract.

The indictment named the executives as Su Liying, 36, deputy director of research and development at Sinovel, and Zhao Haichun, 33, a technology manager. It also says that Sinovel even exported to the Boston area a computer with stolen software that had been paid for with stimulus money.

In response to the indictment, AMSC asked the Obama administration and Congress to “re-evaluate the U.S. trade relationship with China.”

Daniel P. McGahn, the president and chief executive, said in a statement, “We have worked with law enforcement to verify that these Sinovel-manufactured wind turbines contain AMSC’s stolen intellectual property.”

“The fact that Sinovel has exported stolen American intellectual property from China back into the United States — less than 40 miles from our global headquarters — shows not only a blatant disrespect for intellectual property but a disregard for international trade law,” he said.

Disruptions: Smartphone Battles Shift to Software

Eric Risberg/Associated Press Timothy D. Cook, Apple’s chief executive, on Monday at the company’s Worldwide Developers Conference in San Francisco.

SAN FRANCISCO — Last week, Timothy D. Cook, Apple’s chief executive, stood on stage at the company’s Worldwide Developers Conference without a new version of the iPhone or the iPad or some new device.

After showing off new laptop computers and a new, cylindrical Mac Pro, Mr. Cook and other Apple executives spent the rest of their two-hour keynote address discussing the features of Apple’s latest mobile operating system, iOS 7. With the image of a flattened smartphone interface with thin typography on a screen in the background, Mr. Cook proudly noted, “This is the biggest change to iOS since the introduction of the iPhone.”

How does he figure that?

Mr. Cook’s bold claim was based on something that is well understood in tech circles but is easily overlooked by consumers. It is the design of the software, far more than the look and feel of the device itself, that allows a company to leap over its competitors.

Hardware features like processing speed or screen resolution or even how well a camera works offer only fleeting advantages in the constant competition among smartphone manufacturers. And with more than a billion smartphones in the world today, much of them with the same rectangular design meant to fit in your hand yet large enough to be used as a phone, it is hard to imagine a breakthrough in their general look.

But changes to the software are limited only by the skill and creativity of a company’s engineers and designers and are not as easily mimicked since they appeal to softer notions like “experience” rather than speed or weight.

Designers at Apple, Microsoft and Google appear to have been keenly aware of that when they worked on the latest versions of their mobile operating systems, experimenting with ways of making software that is unique yet as intuitive as a road sign.

“I have my home, I have my office and I now I have my phone interface,” said Paola Antonelli, senior curator of architecture and design at the Museum of Modern Art in New York. “When you turn a smartphone off it is an enigmatic monolith; it’s the interface that not only animates it but gives it meaning.” Ms. Antonelli said she hoped to one day include iOS 7 in MoMA’s design collection.

Apple is making some stark changes to the appearance of its software with the latest operating system, which will be available to consumers in the fall. Jonathan Ive, senior vice president for industrial design at Apple and the executive responsible for the new look, has done away with design metaphors like a wood grain bookshelf for the phone’s virtual newsstand. The new look also eliminates borders. It doesn’t sound like much, but that allows apps to stretch across the screen, which makes the phone feel larger. By doing away with shadows and dark colors, the design makes the phone’s screen feel brighter, too.

Interestingly, until this update, among the digital technology community, Apple was losing its reputation for cutting-edge design as competitors like Microsoft experimented.

“From a design standpoint, Apple’s interface became pretty cheesy and predictable,” said Yves Béhar, the founder of Fuseproject, a San Francisco design agency that helped create the low-cost One Laptop Per Child PC and the Jawbone Up wristband health-monitoring device. “It lacked strength and vision.”

Microsoft, which was regularly criticized in recent years for the staid look of its software, has been pushing the design boundaries as it tries to play catch-up in smartphones. In a recent blog post on the company’s Web site, Steve Clayton, a design manager at Microsoft, wrote that company executives finally understood about three years ago that the look of the software was just as important as what the device could do.

The new appearance of the company’s operating system for mobile devices, Windows Phone 7, consists of an array of flat, colorful squares that can be easily moved around on the screen. Though when that tiles-based look was also applied to the Windows 8 PC operating system, some longtime customers complained it was too drastic.

But it has been good for the mobile business.

In the first quarter of 2013, Windows Phone nudged Blackberry to become the third most popular phone operating system globally, according to a report by IDC, a market research firm. Microsoft shipped seven million Windows Phone 7 devices in the first quarter, compared with 6.3 million Blackberry devices. Blackberry is trying to rebound with a new version of its phone with software that has also changed considerably from older versions.

Mr. Béhar said a good software design would always help sell more hardware.

“We are in an era where the 30-second TV ad doesn’t count anymore,” he said. “The product — the smartphone — is its own form of advertising today and a good experience, where people want to spend more time with the product, is what people see.”

E-mail: bilton@nytimes.com

Bits Blog: Love and Hate for Apple’s New Mobile Software

Kimberly White/Getty Images Apple’s Craig Federighi introduced features of the new mobile operating system, which has been significantly redesigned.

Apple this week unveiled a major redesign for iOS, the mobile software system running on iPhones and iPads. The software, called iOS 7, adopts a “flat” design principle that simplifies the look, while introducing thin typography and a vibrant color palette.

After Apple demonstrated iOS 7, Twitter lit up with reactions from designers, Apple fans and even some former Apple employees. The responses were polarized: Some loved the new design, while others despised it.

Here’s a sampling of tweets from notable people in the technology industry.

Andrew Borovsky, a former Apple designer who now works at Square, said the operating system was not designed for everyday people.

iOS (like Windows Phone) is now a type orgy that appeals to print designers not human beings.

— Andrew Borovsky (@borovsky) 11 Jun 13

John Gruber, owner of Daring Fireball, an influential Apple fan blog, could not begin to fathom why anyone would dislike iOS 7.

If you don’t think iOS 7 is beautiful, I don’t know what to say to you.

— John Gruber (@gruber) 10 Jun 13

Khoi Vinh, a former design director for The New York Times who is now an app developer, suggested that Scott Forstall, Apple’s former head of mobile software who was fired last year, did not have much to worry about.

If iOS 7 is revenge on Forstall, Forstall’s revenge may be that it’s kind of not that great.

— Khoi Vinh (@khoi) 12 Jun 13

Matt Gemmell, an Apple app developer, didn’t like some elements of the operating system, but he was otherwise positive about the overall improvements.

The least-mature aspect of iOS 7’s aesthetic change is clearly the Home screen/icons. Don’t let it ruin the excellent improvements.

— Matt Gemmell (@mattgemmell) 10 Jun 13

Sebastiaan de With, chief creative officer of DoubleTwist, the maker of a music app for mobile devices, disliked the icons and the typography of the system.

This is iOS as re-imagined by a graphic designer. Non-obvious, undiscoverable interactions, extremely poor iconography, over-Helveticated.

— Sebastiaan de With (@sdw) 10 Jun 13

Josh Brewer, a designer at Twitter, wondered whether Apple had thoroughly tested iOS 7 before going with this approach.

You gotta wonder if they took their phones outside and looked at all that thin-lined icon + transparency stuff in the sunlight.

— Josh Brewer (@jbrewer) 10 Jun 13

Gadgetwise Blog: Adobe Sends Boxed Software to the Cloud

Adobe Systems this week announced that its popular Creative Suite, which bundles Photoshop, Illustrator and a number of its other products, will be available only by subscription through Adobe’s cloud service, Creative Cloud. No more boxes and disks.

Although Creative Suite was really designed for graphics professionals, this news affects hobbyists because the stand-alone $700 version of Photoshop will also be available by subscription only, but at a subscription price of $240 for a year.

There are a few advantages to using a cloud service, Adobe said. It simplifies sharing and collaborating on projects. If you have customized your settings on one computer, you can access them from any computer. It also means that updates and upgrades are easier for Adobe to carry out.

But calling it a cloud service is a tad misleading. When you subscribe to the service, the software is downloaded to your computer. You can work on images and illustrations even if you don’t have Internet access.

You need to connect occasionally to get updates and to make sure your account doesn’t expire, although an Adobe spokesman said he was unsure how often that connection would have to be made.

There are many price plans, based on the number of products you want to use, which products you have owned before, and how long you are willing to subscribe.

For instance, for the full Creative Cloud Service, which includes all the software in Creative Suite 6 plus 20 gigabytes of free storage and other improvements, it costs $75 a month for a month-to-month subscription. If you are willing to commit in advance for a full year, it’s $50 a month. If you owned Creative Suite 3, 4 or 5, a subscription is $30 a month for the first year if you commit to a year’s subscription. If you owned Creative Suite 6, it’s $20 a month for the first year if you commit to a year’s subscription.

There are similar discounts for single products. For instance, if you had Creative Suite 3 or later, you can get Photoshop alone for as little as $10 a month for the first year.

Adobe said it will continue to sell a boxed version of Creative Suite 6, but will no longer provide software updates for it. The price will remain $1,300 to $2,600, depending on the version.

Lightroom 4, a powerful photo editing program that is sufficient for most photographers, is still sold in a box for $150. Lightroom 5 will soon be released in a boxed version, but the price has not been announced.

State of the Art: Galaxy S4 Crams in More Software, Some of It Good

There’s a world of wisdom there. When Apple designed its original iPhone, it had zero market share; the company had nothing to lose by taking risks. As a result, the phone teemed with bold ideas.

But as the iPhone became more iconic and more important to Apple, the company’s courage to shake things up has dwindled. Why mess with a great thing?

That timidity gave Samsung the opening it needed. Its Galaxy S phone went after the iPhone with all guns blazing, and soon became a cellular celebrity in its own right.

When it was a distant would-be, Samsung had nothing to lose. “Let’s try making the screen really huge!” “Let’s try hand gestures!” “Let’s try eye recognition!”

But now here’s the Galaxy S4, the fourth incarnation of Samsung’s best-seller. (All four big United States carriers will offer it for prices from $150 to $250 with a two-year contract, or around $640 up front.) And here’s the funny thing: Now Samsung is starting to play it safe.

The Galaxy is still a beautiful, high-horsepower Android phone. But basically, it’s an updated Galaxy S3. If this were Apple, who adds the letter S to denote a slightly upgraded model (“iPhone 4S,” for example), Samsung might have called this phone the Galaxy S3S.

The S4 is the same size as the S3 (well, seven-tenths of a millimeter thinner). It’s still huge, more Jumbotron than index card. Good for maps and movies, bad for small hands.

And the S4 is still made of plastic — lightweight and grippy, but not as classy as the iPhone’s glass or the HTC One’s metal.

All told, nobody at the office will notice that you’ve bought the latest and greatest.

Yet Samsung has managed to cram better components into this wafer without increasing its size. The bright, supersharp screen is now 5 inches diagonal, up from 4.8; the margins have shrunk.

The battery is 20 percent bigger, too. That doesn’t necessarily mean much improvement in the one-day battery life, because the larger screen drinks up more power. Fortunately, you can still pop off the back panel and swap batteries, which you can’t do on an iPhone without a blowtorch. You can also expand the storage with a memory card; the iPhone can only watch with envy.

Most of the other changes in the S4 are software features. More than ever, Samsung’s design approach this time was, “Throw everything in and see what sticks.” There was absolutely no filter. There’s also no consistency, coordination or unified direction; it’s just a big, rattling cargo bay crammed with features.

A few examples: SMART SCROLL This is the S4’s much anticipated eye tracking. Like its predecessor, the S4 can recognize your eyes; it can, for example, dim the screen when you look away, to save battery power. In the S4’s video app, playback pauses when you look away (usually).

Better yet, the Web page or e-mail message you’re reading scrolls when you tip your head, or tip the phone a little bit. No hands! It’s unpredictable and gimmicky, but hey — it’s innovation, right?

AIR VIEW Point to the screen without actually touching the glass to get a pop-up preview of something. For example, point to a calendar square to see a pop-up preview of that day’s events, or to a Gallery thumbnail image to see the full-size photo.

Unfortunately, this feature is inconsistent. Why does it work in the Mail program, but not the Gmail program? (For that matter, why does Android require one app for Gmail, and another for other e-mail services?)

AIR GESTURES A sensor sees when you’re waving your hand — a feature that “really adds value when you’re eating with greasy fingers,” Samsung says. You can scroll a Web page or e-mail message by flapping your hand, or accept an incoming call with a wave. When the phone is locked and dark, waving makes the screen light up long enough for you to see the time, battery gauge and notification icons.

Gadgetwise Blog: Free Lightroom 5 Photo Editing Software

Lightroom 5’s Radial Gradient feature can be used to create a vignette, where a picture darkens towards the edges.

Adobe Systems has begun giving away the newest version of its photo editing software, Lightroom 5. But there is a catch.

Lightroom 5 is a public beta test version of a sister product to Adobe’s Photoshop. Lightroom is easier to use than Photoshop, but just as powerful for making overall adjustments to things like color, shadows and contrast. However, it is not as good for extremely detailed editing and has fewer tools.

At the top of the list of Lightroom’s new features is an improved ability to erase and replace objects in photos. The older Lightroom was best at erasing small aberrations, like dust spots. The new Lightroom lets users pick a larger area in any shape to replace. It’s still not as powerful as the Photoshop tool called “Content Aware Fill,” but it’s close.

Adobe has also added a feature called Radial Gradient, which lets photographers draw a circular or oval area in which to apply effects. It can be used to create a vignette, where a picture darkens toward the edges, for instance. So you could circle someone’s face, and have the picture dim as it moves away from her, creating a spotlight to draw the eye.

A new feature called Upright examines the horizontal and vertical lines of a photo to correct for lens distortion. So if you shot a photo with a wide-angle lens, and things at the edges look warped, Upright would adjust it to look as though it had been photographed with a more neutral lens.

The Upright feature.

Slide shows can now include video clips, and you can make and save custom design pages for photo books. There are other enhancements as well.

So what is the catch? When the beta test is over, you won’t be able to use Lightroom 5 anymore unless you buy the new version. Upgrade pricing will be available to people who bought an earlier version of Lightroom.

Oracle’s New Software Sales Fall and Stock Slumps

The world's No. 3 software maker projected a 1 to 11 percent rise in new software licenses and Internet-based subscriptions in the May quarter - an indicator of future performance. But investors focused on a 2 percent slip in the February quarter that badly missed Wall Street's targets.

Oracle's February quarter revenue miss was its worst since the November quarter of 2011.

"What we really saw was the lack of urgency we sometimes see in the sales force, as Q3 deals fall into Q4," Chief Financial Officer Safra Catz told analysts on a conference call.

"Since we've been adding literally thousands of new sales reps around the world, the problem was largely sales execution, especially with the new reps as they ran out of runway in Q3."

Wall Street remains concerned about tepid spending by governments and corporations in an uncertain global environment, but Catz dismissed those fears.

Oracle is also struggling with its hardware division and facing greater competition in cloud or Internet-based software from the likes of International Business Machines Corp and SAP AG and nimbler rivals like Salesforce Inc and Workday Inc.

Oppenheimer analyst Brian Schwartz said Oracle's May-quarter software sales projection was in line with expectations.

"That's probably a little hint that they've gotten off to a good start in Q4, that some of those deals that slipped in Q3 likely closed in Q4," Schwartz said.

WHITHER HARDWARE

Some investors still worry that governments and corporations around the globe may postpone spending on technology projects because of uncertainty over the economy, particularly in Europe.

"Business sentiment and confidence is way down. People are more cautious right now in business than they are in the stock market. That's how we get very high valuation multiples on stocks, but businesses are pulling back," said Richard Williams, an analyst at Cross Research.

Revenue from Oracle's hardware division, which it acquired through the $5.6 billion purchase of Sun Microsystems in 2010, fell to $671 million from $869 million in the year-ago quarter.

The division's revenue has fallen every quarter since it closed the Sun deal and Chief Executive Larry Ellison had said in December he expected hardware systems revenue to start growing in the fiscal fourth quarter.

Oracle projected its hardware product revenue for the current quarter would fall between 12 and 22 percent.

"There are areas that continue to be in transition, like the hardware business and the overall move to the cloud," said FBR Capital Markets analyst Daniel Ives. "They obviously hit a speed bump but the company is cautiously optimistic."

Oracle posted a 2 percent drop in new software sales and Internet-based software subscriptions to $2.3 billion in its fiscal third quarter. Investors scrutinize new software sales because they generate high-margin, long-term maintenance contracts and are an important barometer of future profit.

"It doesn't help that the sequester deadline is on the last day of our quarter, and so that has a little bit of an impact here in North America, but not necessarily anywhere else," Catz said. "The economy has been as it is in Europe for a while."

Oracle's revenue miss - about 4.4 percent below the average forecast - was its worst since the November quarter of 2011, when it fell short of target by 4.5 percent, according to Thomson Reuters data.

Next week, Oracle will start deliveries of its latest generation of servers, built with a record-breaking microprocessor, Ellison said.

Overall, Oracle's revenue dipped 1 percent to $9 billion, missing the $9.382 billion analysts had expected on average according to Thomson Reuters I/B/E/S.

GAAP net profit was unchanged at $2.5 billion. GAAP earnings per share were 52 cents, up 6 percent from the year-ago period. Its adjusted earnings per share were 65 cents, shy of 66 cents expected by analysts.

Shares in the software company fell 8 percent to $32.95 after hours, from a close of $35.765 on Nasdaq.

(Reporting by Noel Randewich; Editing by Richard Chang)

Bits Blog: Researchers Find 25 Countries Using Surveillance Software

Thor Swift for The New York Times Bill Marczak, left, and Morgan Marquis-Boire have been studying government use of surveillance software.

Last May, two security researchers volunteered to look at a few suspicious e-mails sent to some Bahraini activists. Almost one year later, the two have uncovered evidence that some 25 governments, many with questionable records on human rights, may be using off-the-shelf surveillance software to spy on their own citizens.

Morgan Marquis-Boire, a security researcher at Citizen Lab, at the University of Toronto’s Munk School of Global Affairs, and Bill Marczak, a computer science doctoral student at the University of California, Berkeley, found that the e-mails contained surveillance software that could grab images off computer screens, record Skype chats, turn on cameras and microphones and log keystrokes. The word “FinSpy” appeared in the spyware code. FinSpy is spyware sold by the Gamma Group, a British company that says it sells monitoring software to governments solely for criminal investigations.

Now, one year later, Mr. Marquis-Boire and Mr. Marczak have found evidence that FinSpy is being run off servers in 25 countries, including Ethiopia and Serbia, without oversight.

Until Mr. Marquis-Boire and Mr. Marczak stumbled upon FinSpy last May, security researchers had tried, unsuccessfully, for a year to track it down. FinSpy gained notoriety in March 2011 after protesters raided Egypt’s state security headquarters and discovered a document that appeared to be a proposal by the Gamma Group to sell FinSpy to the government of President Hosni Mubarak .

Martin J. Muench, a Gamma Group managing director, has said his company does not disclose its customers but that Gamma Group sold its technology to governments only to monitor criminals. He said that it was most frequently used “against pedophiles, terrorists, organized crime, kidnapping and human trafficking.”

But evidence suggests the software is being sold to governments where the potential for abuse is high. “If you look at the list of countries that Gamma is selling to, many do not have a robust rule of law,” Mr. Marquis-Boire said. “Rather than catching kidnappers and drug dealers, it looks more likely that it is being used for politically motivated surveillance.”

As of last year, Mr. Marquis-Boire and Mr. Marczak, with other researchers at Rapid7, CrowdStrike and others, had found command-and-control servers running the spyware in just over a dozen countries. They have since scanned the entire Internet for FinSpy.

The Munk School is publishing their updated findings on Wednesday. The list of countries with servers running FinSpy is now Australia, Bahrain, Bangladesh, Britain, Brunei, Canada, the Czech Republic, Estonia, Ethiopia, Germany, India, Indonesia, Japan, Latvia, Malaysia, Mexico, Mongolia, Netherlands, Qatar, Serbia, Singapore, Turkmenistan, the United Arab Emirates, the United States and Vietnam.

In Ethiopia, FinSpy was disguised in e-mails that were specifically aimed at political dissidents. The e-mails lured targets to click on pictures of members of Ginbot 7, an Ethiopian opposition group. When they clicked on the pictures, FinSpy downloaded to their machines and their computers began communicating with a local server in Ethiopia.

“This continues the theme of FinSpy deployments with strong indications of politically motivated targeting,” the researchers wrote in their report.

A Turkmenistan server running the software belonged to a range of I.P. addresses specifically assigned to the ministry of communications. Turkmenistan is the first clear-cut case of a government running the spyware off its own computer system. Human Rights Watch has called Turkmenistan one of the world’s “most repressive countries” and warned that dissidents faced “constant threat of government reprisal.”

In Vietnam, the researchers found evidence that FinSpy was running on Android-powered phones. They found one Android phone infected with FinSpy that was sending text messages back to a Vietnamese telephone number. That finding was particularly troubling, researchers say, given recent clampdowns by the nation’s government. Last year, Vietnam introduced censorship laws that prohibit bloggers from speaking out against the country’s ruling Communist party. According to Human Rights Watch, at least 40 people had since been convicted and sentenced to prison terms. Many are now serving terms ranging from three to 13 years.

The sale of surveillance technology is still largely unregulated, but Mr. Marquis-Boire and Mr. Marczak’s findings have prompted greater scrutiny. Responding to their findings last fall, Germany’s foreign minister Guido Westerwelle called for an Europe-­wide ban on the export of surveillance technology to repressive regimes. And last month, Privacy International and other groups filed complaints with the Organization for Economic Cooperation and Development against Gamma Group and Trovicor GmbH, a German company that also sells surveillance software.

“I don’t think you can put technology back in the bottle,” said Mr. Marquis-Boire. “I understand why police would want to use this type of technology, but I’m just not for commercial companies selling them to nondemocratic regimes with questionable human rights records.”

Chinese Businessman Pleads Guilty in Stolen Software Case

The sophisticated software was stolen from an estimated 200 American manufacturers and sold to 325 black market buyers in 61 countries from 2008 to 2011, prosecutors said in court filings. U.S. buyers in 28 states included a NASA engineer and the chief scientist for a defense and law-enforcement contractor, prosecutors said.

Corporate victims in the case included Microsoft, Oracle, Rockwell Automation,, Agilent Technologies, Siemens, Delcam, Altera Corp and SAP, a government spokesman said.

U.S. officials and the Chinese man's lawyer, Mingli Chen, said the case was the first in which a businessman involved in pirating industrial software was lured from China by undercover agents and arrested.

The businessman, Xiang Li, of Chengdu, China, was arrested in June 2011, during an undercover sting by U.S. Department of Homeland Security agents on the Pacific island of Saipan, an American territory near Guam.

Video from the undercover meeting in Saipan, filed as evidence in court, is expected to be made public during a press conference Tuesday by John Morton, director of U.S. Immigration and Customs Enforcement, and Charles M. Oberly III, the U.S. Attorney for Delaware.

Li, 36, originally charged in a 46-count indictment, pleaded guilty late Monday to single counts of conspiracy to commit criminal copyright violations and wire fraud.

"I want to tell the court that what I did was wrong and illegal and I want to say I'm sorry," Li told U.S. District Judge Leonard P. Stark during a 90-minute hearing in federal court. The Chinese citizen spoke through a translator.

In a court filing, prosecutors David Hall and Edward McAndrew said the retail value of the programs Li sold on the black market exceeded $100 million.

During the hearing, Li told U.S. District Judge Leonard Stark that he disputes that figure. After the hearing, his lawyer said Li did not realize the retail value of what he was selling until he was caught and plans to present his own estimate at sentencing, which is set for May 3, he said.

In recent years, U.S. officials have targeted software pirates overseas but bringing them to the United States has proved difficult.

In one of the largest copyright cases, U.S. prosecutors last year charged seven people, including Megaupload founder Kim Dotcom, with racketeering conspiracy and copyright violations. The indictment alleges that Dotcom, who lives in New Zealand, ran an organization that earned $175 million selling an estimated $500 billion worth of pirated movies, TV shows and other entertainment media. Dotcom is fighting extradition from New Zealand.

EXPENSIVE SOFTWARE

The Li case involves sophisticated business software, not entertainment software, and thus small quantities of higher-priced products. The retail value of the products Li pirated ranged from several hundred dollars to more than $1 million apiece. He sold them online for as little as $20 to $1,200, according to government court filings.

At one point, Crack99.com and Li's other sites offered more than 2,000 pirated software titles, prosecutors said.

Li trolled black market Internet forums in search of hacked software, and people with the know-how to crack the passwords needed to run the program. Then he advertised them for sale on his websites. Li transferred the pirated programs to customers by sending compressed files via Gmail, or sent them hyperlinks to download servers, officials said.

"He was pretty proud of himself," Chen said of his client's business acumen. "He did not realize it was such a big crime."

Agents from Immigration and Customs Enforcement/Homeland Security Investigations learned of Li's enterprise after an unidentified U.S. manufacturer noticed his company's software for sale on crack99.com.

Working undercover for 18 months beginning in early 2010, the U.S. agents made at least five purchases from Li. These included pirated versions of "Satellite Tool Kit" by Analytical Graphics Inc. of Exton, Penn., a product prosecutors said is "designed to assist the military, aerospace and intelligence industries through scenario-based modules that simulate real-world situations, such as missile launches, warfare simulations and flight trajectories." Agents bought software worth $150,000 retail for several thousand dollars.

Agents lured Li from China to the U.S. territory of Saipan under the premise of discussing a joint illicit business venture. At an island hotel, Li delivered counterfeit packaging and, prosecutors said, "Twenty gigabytes of proprietary data obtained unlawfully from an American software company." Officials did not identify the company in court documents.

(Editing by Cynthia Osterman)

Bits Blog: GitHub Has Big Dreams for Open-Source Software, and More

Tom Preston-Werner, GitHub’s co-founder and chief executive

Software is not merely about automating every aspect of our lives anymore. Some of its makers want to change the way we all interact, spreading their supposed egalitarian excellence.

Whether this is liberation into a new and better mode of being (and yes, the people thinking about this take it to that scale) or the folly of an industry in love with its success is one of the more intriguing questions of a world rushing to live online.

GitHub is a San Francisco company that started in 2008 as a way for open-source software writers in disparate locations to rapidly create new and better versions of their work. Work is stored, shared and discussed, based on the idea of a “pull request,” which is a suggestion to the group for some accretive element, like several lines of code, to be “pulled,” or added, to a project.

“The concept is based around change: what is the right thing to do, what is the wrong thing?” said Tom Preston-Werner, GitHub’s co-founder and chief executive. “The efficiency of large groups working together is very low in large enterprises. We want to change that.”

Mr. Preston-Werner’s own company is something of a proxy for how he sees the world. GitHub has no managers among its 140 employees, for example. “Everyone has management interests,” he said. “People can work on things that are interesting to them. Companies should exist to optimize happiness, not money. Profits follow.” He does, however, retain his own title and decides things like salaries.

In his blog Mr. Preston-Werner has written about how important it is for  companies to expose as much of their inner workings as possible. Another member of GitHub has posted a talk that stresses how companies flourish when people want to work on certain things, not because they are told to.

This style and sentiment echoes those at another company, Asana, a corporate social network aiming to improve the pace of work. Founded by Dustin Moskovitz, who was a co-founder of Facebook and for many years ran its technology, Asana bases work on a series of to-do lists that people assign one another. Inside Asana there are no formal titles, though like GitHub there are bosses at the top who make final decisions.

For all the happiness and sharing, real money is involved here. In July GitHub received $100 million from the venture capital firm Andreessen Horowitz. This early in most software companies’ lives, $20 million would be a fortune.

Companies pay to use GitHub, and it has become an exceptionally popular way for people to do all kinds of software work; in 2012 its number of users jumped to 2.8 million from 1.2 million. The number of “repositories” — containing code, its documentation, images associated with a project or other work — increased to 4.6 million from 1.7 million last year.

Many of these are open-source projects, and GitHub does not break out their revenue.

GitHub’s popularity has also made it an important way for companies to recruit engineers, because some of the best people in the business are showing their work or dissecting the work of others inside some of the public pull requests. Its founders and backers, however, want to use the GitHub model to make mobile and enterprise software applications, and possibly much more.

Mr. Preston-Werner thinks the way open source requires a high degree of trust and collaboration among relative equals (plus a few high-level managers who define the scope of a job and make final decisions) can be extended more broadly, even into government.

“For now this is about code, but we can make the burden of decision-making into an opportunity,” he said. “It would be useful if you could capture the process of decision-making, and see who suggested the decisions that created a law or a bill.”

Can this really be extended across a large, complex organization, however?

As complex as an open-source project may be, it is also based on a single, well-defined outcome, and an engineering task that is generally free of concepts like fairness and justice, about which people can debate endlessly. Even on a less lofty plane, companies like GitHub and Asana will ultimately test themselves against complex corporate processes lasting years, and involving skills in both science and the humanities. Google once prided itself on few managers and fast action, but has found that getting big can also involve lots more meetings.

Still, these fast-rising successes may be on to something more than simply universalizing the means of their own good fortune. An early guru of the Information Age, Peter Drucker, wrote often in the latter part of his career of the need for managers to define tasks, and for workers to seek fulfillment before profits.

Antivirus Makers Work on Software to Catch Malware More Effectively

Consumers and businesses spend billions of dollars every year on antivirus software. But these programs rarely, if ever, block freshly minted computer viruses, experts say, because the virus creators move too quickly. That is prompting start-ups and other companies to get creative about new approaches to computer security.

“The bad guys are always trying to be a step ahead,” said Matthew D. Howard, a venture capitalist at Norwest Venture Partners who previously set up the security strategy at Cisco Systems. “And it doesn’t take a lot to be a step ahead.”

Computer viruses used to be the domain of digital mischief makers. But in the mid-2000s, when criminals discovered that malicious software could be profitable, the number of new viruses began to grow exponentially.

In 2000, there were fewer than a million new strains of malware, most of them the work of amateurs. By 2010, there were 49 million new strains, according to AV-Test, a German research institute that tests antivirus products.

The antivirus industry has grown as well, but experts say it is falling behind. By the time its products are able to block new viruses, it is often too late. The bad guys have already had their fun, siphoning out a company’s trade secrets, erasing data or emptying a consumer’s bank account.

A new study by Imperva, a data security firm in Redwood City, Calif., and students from the Technion-Israel Institute of Technology is the latest confirmation of this. Amichai Shulman, Imperva’s chief technology officer, and a group of researchers collected and analyzed 82 new computer viruses and put them up against more than 40 antivirus products, made by top companies like Microsoft, Symantec, McAfee and Kaspersky Lab. They found that the initial detection rate was less than 5 percent.

On average, it took almost a month for antivirus products to update their detection mechanisms and spot the new viruses. And two of the products with the best detection rates — Avast and Emsisoft — are available free; users are encouraged to pay for additional features. This despite the fact that consumers and businesses spent a combined $7.4 billion on antivirus software last year — nearly half of the $17.7 billion spent on security software in 2011, according to Gartner.

“Existing methodologies we’ve been protecting ourselves with have lost their efficacy,” said Ted Schlein, a security-focused investment partner at Kleiner Perkins Caufield & Byers. “This study is just another indicator of that. But the whole concept of detecting what is bad is a broken concept.”

Part of the problem is that antivirus products are inherently reactive. Just as medical researchers have to study a virus before they can create a vaccine, antivirus makers must capture a computer virus, take it apart and identify its “signature” — unique signs in its code — before they can write a program that removes it.

That process can take as little as a few hours or as long as several years. In May, researchers at Kaspersky Lab discovered Flame, a complex piece of malware that had been stealing data from computers for an estimated five years.

Mikko H. Hypponen, chief researcher at F-Secure, called Flame “a spectacular failure” for the antivirus industry. “We really should have been able to do better,” he wrote in an essay for Wired.com after Flame’s discovery. “But we didn’t. We were out of our league in our own game.”

Symantec and McAfee, which built their businesses on antivirus products, have begun to acknowledge their limitations and to try new approaches. The word “antivirus” does not appear once on their home pages. Symantec rebranded its popular antivirus packages: its consumer product is now called Norton Internet Security, and its corporate offering is now Symantec Endpoint Protection.

“Nobody is saying antivirus is enough,” said Kevin Haley, Symantec’s director of security response. Mr. Haley said Symantec’s antivirus products included a handful of new technologies, like behavior-based blocking, which looks at some 30 characteristics of a file, including when it was created and where else it has been installed, before allowing it to run. “In over two-thirds of cases, malware is detected by one of these other technologies,” he said.

Oracle Software Sales and Profit Beat Forecasts

Shares of the world's No. 3 software maker rose 2.6 percent after it reported fiscal second-quarter revenue and earnings that surpassed Wall Street forecasts.

Oracle President Safra Catz told investors that businesses were still looking to spend money already allocated to 2012 technology budgets.

"Folks want to close deals," she told analysts on a conference call following the earnings release on Tuesday. There has been "no negative impact on pricing. Pricing remains very good for us."

Oracle said software sales would grow 3 to 13 percent this quarter, which runs through February. It expects fiscal third-quarter hardware products sales to be flat to down 10 percent from a year ago.

The company's software and hardware forecasts were roughly in line with Wall Street expectations, according to FBR Markets analyst Daniel Ives.

Oracle reported that software sales and cloud software subscriptions rose 17 percent from a year earlier to $2.4 billion in its fiscal second quarter ended November 30.

Oracle had forecast that new software sales would climb 5 to 15 percent from a year earlier when it last reported earnings on September 20.

"I would call it an early Christmas present," Ives said. "It's a positive sign for the overall technology sector."

Investors pay close attention to new software sales because they generate high-margin, long-term maintenance contracts and are an important gauge of the company's future profits.

Oracle posted a second-quarter profit, excluding items, of 64 cents per share, beating the average analyst forecast of 61 cents according to Thomson Reuters I/B/E/S.

Jefferies & Co analyst Ross MacMillan said Oracle's results are encouraging for other makers of business software, many of which end their quarter on December 31.

OFF A CLIFF

Some investors have worried that corporations would postpone spending on technology projects because of uncertainty over the year-end deadline for Congress and U.S. President Barack Obama to reach a compromise to thwart an automatic rise in tax rates and government spending cuts.

Failing to reach a deal, economists say, could lead to another U.S. recession. Catz said Oracle's customers are still spending on software.

"What's going on in Washington - I don't know who it's necessarily influencing today. But I can tell you, our customers have been spending money with us even here in December."

On Tuesday, Oracle forecast earnings per share in the current fiscal third quarter of 64 to 68 cents, excluding items. That was about level with an average forecast for 66 cents.

"It tells you that there's still money being spend by enterprises on software. It's not like the world has ground to a halt," MacMillan said.

The picture was not so bright for Oracle's troubled hardware division, which it acquired with its $5.6 billion purchase of Sun Microsystems in January 2010. The division's revenue has fallen every quarter since it closed that deal.

Hardware systems product sales fell 23 percent from a year earlier to $734 million. Oracle had forecast that hardware sales would drop between 8 and 18 percent.

Chief Executive Larry Ellison told analysts he expected hardware systems revenue to start growing in the fiscal fourth quarter which begins March 1.

Oracle shares rose to $33.75 in extended trade after closing at $32.88 on Nasdaq.

(Reporting by Jim Finkle; Additional reporting by Noel Randewich; Editing by Gary Hill and Richard Chang)

Digital Domain: Air Force Stumbles Over Software Modernization Project

For the United States Air Force, installing a new software system has certainly proved to be a wicked problem. Last month, it canceled a six-year-old modernization effort that had eaten up more than $1 billion. When the Air Force realized that it would cost another $1 billion just to achieve one-quarter of the capabilities originally planned — and that even then the system would not be fully ready before 2020 — it decided to decamp.

Silicon Valley sees its share of software projects that end unhappily. The most expensive failures, however, involve acquisitions of entire companies with software assets that turn out to be far less valuable than thought. Those can lead to stunning write-downs in the billions, as Hewlett-Packard has been forced to take recently.

But the Air Force’s software was not some mystery package, nor was it written from scratch. It was commercial off-the-shelf software, or “COTS” (the military can’t seem to resist any chance to use an acronym).

Installing COTS to run an enterprise is not a straightforward matter. The Air Force would have to make myriad adjustments to accommodate its individual needs, and in a military setting that would mean meetings and more meetings, unlike anything ever experienced in a Silicon Valley company. Still, it is hard to understand how the Defense Department blew a billion dollars before the plug was pulled.

The software initiative, called the Expeditionary Combat Support System, was supposed to manage logistics using software from Oracle. In 2006, the Air Force announced that it had awarded a $628 million contract to the Computer Sciences Corporation to serve as lead system integrator; its job would be to “configure, deploy and conduct training and change management activities” before the launch.

Four years later, in 2010, the Air Force said it had pilot programs under way at two bases. In remarks made at the time by Grover Dunn, the Air Force director of transformation, we can see just how unrealistic the project was: “We’ve never tried to change all the processes, tools and languages of all 250,000 people in our business at once, and that’s essentially what we’re about to do.”

Signs that such comprehensive change could not, in fact, be done “at once” were visible last spring. Last April, Jamie M. Morin, assistant secretary of the Air Force, testified before a subcommittee of the Senate’s Armed Services Committee about E.C.S.S.: “The total cost on the system is now over $1 billion,” he said, adding, “I am personally appalled at the limited capabilities that program has produced relative to that amount of investment.”

With the cancellation of the system last month, a spokeswoman said that the Air Force would continue to rely on its legacy logistics systems, some of which have been in use since the 1970s.

THE Defense Department says that the way the system was conceived was flawed. “We started with a Big Bang approach and put every possible requirement into the program, which made it very large and very complex,” says Elizabeth McGrath, the department’s deputy chief management officer.

E.C.S.S. was restructured many times, including three separate times in the last three years, Ms. McGrath says. “Each time, we chunked it down, breaking it into smaller pieces, focusing on specific capabilities.” But this was not enough to save the system, she says, because program managers did not succeed in imposing the short deadlines of 18 to 24 months that the department now requires for similar projects. Tight deadlines will certainly go a long way toward avoiding future billion-dollar fiascos. But much more needs to change before the department’s older software systems can be replaced.

In 2011, the nonprofit Institute for Defense Analyses, which performs independent research for the government on national security issues, issued a lengthy report on Defense Department software initiatives like E.C.S.S. It noted that modernization of the department’s software systems had been a priority for nearly 15 years, and that more than $5.8 billion had been spent through 2009 on large operational software systems, most of which were behind schedule. It recommended that the department suspend deployment of all new systems until reviews were completed.

The report cited many concerns, but the main one was a failure to meet a basic requirement for successful implementation: having “a single accountable leader” who “has the authority and willingness to exercise the authority to enforce all necessary changes to the business required for successful fielding of the software.”

I spoke last week with Paul K. Ketrick and Graeme R. Douglas, two institute researchers who were among the co-authors of the study. They said some small-scale operational systems in the Defense Department had drawn praise for successful unveilings, in the Navy and in the Defense Logistics Agency, for example.

“They got there because they had strong leadership who committed to the program and had the authority to make the changes necessary for success,” said Mr. Douglas. But “it’s rare that a single leader in the Department of Defense has the authority over the span of activities” affected by the systems, he said.

Pat Phelan, a research vice president at Gartner, the information technology research company, also calls attention to the difficult and time-consuming nature of decision-making within the department. She advocates empowering small groups to make necessary decisions, as is done in the private sector, but she does not expect the department to change. “That mind-set, that cultural shift, is not something I expect to happen in my lifetime,” she said.

The record of software modernization at the Department of Defense is discouraging. In Silicon Valley, software projects can run aground, but they don’t fail because of endless meetings and complex bureaucratic requirements, not to mention the constant need to be ready to fight wars. As Mr. Ketrick says, “Replacing the systems that run the Department of Defense is a wicked problem.”

Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. E-mail: stross@nytimes.com.

Software Programs Help Doctors Diagnose, but Can’t Replace Them

At last he spoke. “Lymphoma with secondary hemophagocytic syndrome,” he said. The crowd erupted in applause.

Professionals in every field revere their superstars, and in medicine the best diagnosticians are held in particularly high esteem. Dr. Gurpreet Dhaliwal, 39, a self-effacing associate professor of clinical medicine at the University of California, San Francisco, is considered one of the most skillful clinical diagnosticians in practice today.

The case Dr. Dhaliwal was presented, at a medical  conference last year, began with information that could have described hundreds of diseases: the patient had intermittent fevers, joint pain, and weight and appetite loss.

To observe him at work is like watching Steven Spielberg tackle a script or Rory McIlroy a golf course. He was given new information bit by bit — lab, imaging and biopsy results. Over the course of the session, he drew on an encyclopedic familiarity with thousands of syndromes. He deftly dismissed red herrings while picking up on clues that others might ignore, gradually homing in on the accurate diagnosis.

Just how special is Dr. Dhaliwal’s talent? More to the point, what can he do that a computer cannot? Will a computer ever successfully stand in for a skill that is based not simply on a vast fund of knowledge but also on more intangible factors like intuition?

The history of computer-assisted diagnostics is long and rich. In the 1970s, researchers at the University of Pittsburgh developed software to diagnose complex problems in general internal medicine; the project eventually resulted in a commercial program called Quick Medical Reference. Since the 1980s, Massachusetts General Hospital has been developing and refining DXplain, a program that provides a ranked list of clinical diagnoses from a set of symptoms and laboratory data.

And I.B.M., on the heels of its triumph last year with Watson, the Jeopardy-playing computer, is working on Watson for Healthcare.

In some ways, Dr. Dhaliwal’s diagnostic method is similar to that of another I.B.M. project: the Deep Blue chess program, which in 1996 trounced Garry Kasparov, the world’s best player at the time, to claim an unambiguous victory in the computer’s relentless march into the human domain.

Although lacking consciousness and a human’s intuition, Deep Blue had millions of moves memorized and could analyze as many each second. Dr. Dhaliwal does the diagnostic equivalent, though at human speed.

Since medical school, he has been an insatiable reader of case reports in medical journals, and case conferences from other hospitals. At work he occasionally uses a diagnostic checklist program called Isabel, just to make certain he hasn’t forgotten something. But the program has yet to offer a diagnosis that Dr. Dhaliwal missed.

Dr. Dhaliwal regularly receives cases from physicians who are stumped by a set of symptoms. At medical conferences, he is presented with one vexingly difficult case and is given 45 minutes to solve it. It is a medical high-wire act; doctors in the audience squirm as the set of facts gets more obscure and all the diagnoses they were considering are ruled out. After absorbing and processing scores of details, Dr. Dhaliwal must commit to a diagnosis. More often than not, he is right.

When working on a difficult case in front of an audience, Dr. Dhaliwal puts his entire thought process on display, with the goal of “elevating the stature of thinking,” he said. He believes this is becoming more important because physicians are being assessed on whether they gave the right medicine to a patient, or remembered to order a certain test.

Without such emphasis, physicians and training programs might forget the importance of having smart, thoughtful doctors. “Because in medicine,” Dr. Dhaliwal said, “thinking is our most important procedure.”

He added: “Getting better at diagnosis isn’t about figuring out if someone has one rare disease versus another. Getting better at diagnosis is as important to patient quality and safety as reducing medication errors, or eliminating wrong site surgery.”

Clinical Precision

Dr. Dhaliwal does half his clinical work on the wards of the San Francisco V. A. Medical Center, and the other half in its emergency department, where he often puzzles through multiple mysteries at a time.

One recent afternoon in the E.R., he was treating a 66-year-old man who was mentally unstable and uncooperative. He complained of hip pain, but routine lab work revealed that his kidneys weren’t working and his potassium was rising to a dangerous level, putting him in danger of an arrhythmia that could kill him — perhaps within hours. An ultrasound showed that his bladder was blocked.

There was work to be done: drain the bladder, correct the potassium level. It would have been easy to dismiss the hip pain as a distraction; it didn’t easily fit the picture. But Dr. Dhaliwal’s instinct is to hew to the ancient rule that physicians should try to come to a unifying diagnosis. In the end, everything — including the hip pain — was traced to metastatic prostate cancer.

“Things can shift very quickly in the emergency room,” Dr. Dhaliwal said. “One challenge of this, whether you use a computer or your brain, is deciding what’s signal and what’s noise.” Much of the time, it is his intuition that helps figure out which is which.

DealBook: H.P. Claim Highlights a Gray Area in Software Sales

Ryan Anson/Bloomberg News, via Getty ImagesCatherine Lesjak, Hewlett-Packard’s finance chief, said Autonomy’s profitability was less than it seemed. Mike Lynch, its former chief, denied any improprieties.

Hewlett-Packard’s accusations of “serious accounting improprieties” at Autonomy are eerily reminiscent of accounting missteps uncovered over a decade ago at software firms like MicroStrategy, Computer Associates and Lernout & Hauspie.

“It looks like a throwback to the bubble era,” said Jack T. Ciesielski, publisher of The Analyst’s Accounting Observer.

Indeed, the claims made on Tuesday suggest that there is something about the nature of the software business that makes it easier for executives to indulge in questionable accounting.

Hewlett-Packard contends that Autonomy, the British software firm that it acquired for $10 billion last year, misclassified revenue, including sales of hardware with sales of software licenses. Investors care far more about software sales, and this purported strategy made it look as if software was doing better than it was.

The hardware sales were unprofitable, Hewlett says, and accounted for 10 to 15 percent of Autonomy’s revenue before the purchase. In addition, Hewlett contends that this practice made a measure of profitability called gross margin look stronger than it really was.

Revenue was inflated by other means, Hewlett said. Autonomy also booked revenue too early and when a proper sale hadn’t taken place, the company said.

Catherine A. Lesjak, Hewlett’s chief financial officer, said that without the help from such aggressive accounting, Autonomy most likely had operating margins of 28 to 30 percent, rather than 40 to 45 percent.

Mike Lynch, the former chief executive of Autonomy, denies that the company’s financial statements were misleading or contained improprieties.

“We were shocked and very surprised because no one had actually been in touch with us,” he said.

How companies recognize revenue is critical to analysts who track the performance of software companies. They have learned to watch the process very closely. Both Computer Associates and MicroStrategy had booked revenue prematurely, according to the Securities and Exchange Commission cases at the time.

Analysts focus on a balance-sheet liability called deferred revenue. This is unearned revenue that represents software services that are still owed to clients. When this doesn’t keep up with investors’ expectations, a software company’s shares can fall. As a result, there may be a temptation to make this item look bigger than it was.

“Revenue recognition has always been difficult with these kinds of companies,” Mr. Ciesielski said. The problem, he says, is that software contracts bundle different types of sales. That can make it easier to conceal expenses, inflate certain types of revenue and tweak the timing of when revenue is recognized.

“There are different ways to tug and stretch the numbers,” he said.

The claims by Hewlett surprised investors, who sent the company’s shares down sharply, off 12 percent on the day.

Even so, some hedge fund investors have been skeptical about Autonomy for a several years, and questions about its numbers have bubbled in the marketplace.

“It was dead easy to spot that Autonomy’s statements weren’t right,” said John Hempton, the manager of Bronte Capital, a hedge fund based in Sydney, Australia. “The extent of it I didn’t know.” Mr. Hempton voiced his suspicions about Autonomy last month in a presentation to an investment forum in New York.

Some were raising questions even earlier. In July 2009, Kynikos Associates, the firm founded by the investor James S. Chanos, wrote a detailed report that criticized Autonomy’s accounting in ways that now appear prescient.

In its 2009 note, Kynikos said that Autonomy’s deferred revenue appeared lackluster. It added that the company might have masked the underperformance with acquisitions.

Hewlett said a whistle-blower came forward in May, prompting it to conduct an internal investigation, which it says turned up the accounting missteps at Autonomy. Its disclosure raises another uncomfortable question: Why Hewlett — and its auditors — could not spot what it now says it has uncovered. Hewlett says two accounting firms failed to catch what it now says were ruses.

On a conference call on Tuesday, John F. Schultz, H.P.’s general counsel, said Autonomy kept opaque books. “Critical documents were missing from the obvious places and it required that we look in every nook and cranny,” he said.

It’s possible that the company was looking at Autonomy through somewhat rose-colored glasses at the time of the acquisition, putting its desire for growth above the need for thorough due diligence. Autonomy cost $11.1 billion. Hewlett said Tuesday that it took a charge of more than $5 billion related to the accounting trouble, though it’s not clear exactly how the company arrived at that amount.

Despite everything, Hewlett’s chief executive, Meg Whitman, said that Autonomy would still play an important role at her company.

“This will be a growth engine for H.P.,” she said, then added, “Perhaps not as big a growth engine as we originally anticipated.”

The Lede Blog: Software Entrepreneur in Hiding From Police Investigating Murder in Belize

John McAfee speaks with the editor of The San Pedro Sun, a newspaper in Belize, about the homicide investigation of his neighbor and why he is in hiding from the police.

John McAfee, founder of the antivirus software company that bears his name, told reporters Wednesday he had been in hiding for the last three days to avoid police questioning about the murder of his 52-year-old neighbor in Belize. The neighbor had recently complained to the authorities about Mr. McAfee’s dogs.

Belize police officials told The San Pedro Sun in Belize that they just want to talk to Mr. McAfee about the killing. Mr. McAfee has lived in Belize since 2008.

On Wednesday, the police arrested Mr. McAfee’s bodyguard and the bodyguard’s wife on firearms charges, a move Mr. McAfee said was intended to pressure him to come out of hiding. Mr. McAfee expressed concern to Joshua Davis, a reporter from Wired magazine writing about the case, and Tamara Sniffin, the editor of The San Pedro Sun, that, if he is found, the police will wrongfully accuse him in the killing of his neighbor Gregory Faull. Mr. Faull was found by his housekeeper on Sunday morning, lying in a pool of blood with a gunshot wound to his head.

From his hiding place, Mr. McAfee called Ms. Sniffin, who posted a video of their conversation on YouTube.

Mr. McAfee has also been providing regular updates from Belize to Mr. Davis, who has been posting them on Twitter.

Police have charged McAfee’s British bodyguard and his Belizean wife of possessing a firearm and ammunition without a license.

— Joshua Davis (@JoshuaDavisNow) 14 Nov 12

McAfee just now: I don’t need a lawyer. I’m innocent.

— Joshua Davis (@JoshuaDavisNow) 14 Nov 12

Either way, McAfee says he has no intention of turning himself in for questioning as he believes he will not survive police custody.

— Joshua Davis (@JoshuaDavisNow) 13 Nov 12

McAfee says the police raided the house next door to where he was and he evaded them.

— Joshua Davis (@JoshuaDavisNow) 13 Nov 12

McAfee just called: He has changed locations. The police have not caught him yet.

— Joshua Davis (@JoshuaDavisNow) 13 Nov 12

“John McAfee is wanted for questioning only,” Assistant Police Superintendent Vienne Robinson told Jorge Aldana of The San Pedro Sun. “Information gathered strongly suggests that he may be able to shine some light into this investigation.”

According to a police report, Mr. Faull was found dead in the hallway of his home. His phone and laptop were missing. The report said that the police had not established a motive but were following “several leads.”

Mr. Aldana reported last May that the police raided Mr. McAfee’s home looking for drugs and illegal firearms. No illegal drugs were found, but the police did find illegal weapons.

Mr. McAfee said that the raid was part of an effort to get him to leave the country because he does not follow “the rules.”

Mr. McAfee sent an essay to Mr. Davis, describing Belize as a “pirate haven.”

“Belize is, today, still a pirate haven and is run more or less along the lines established centuries ago by the likes of Captain Morgan, Blackbeard and Captain Barrow: Plunder is the preferred means of wealth acquisition; Exploitation is the preferred formula for success; Brutality creates respect; Fear is the means of governance; Extortion is the method of collecting what is due. It’s a system that functions more or less smoothly if you play by the rules.

I am not fond of these rules however and I openly oppose them. This is the root of my struggle here in Belize.”