– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

The fate of Yahoo Inc has become intertwined in the public’s imagination with the success or failure of its dealings with Microsoft Corp in recent years.

That’s despite the fact that as much as 70 percent of the value investors put on Yahoo’s depressed shares are tied up in its international assets or cash holdings — factors that have nothing to do with Microsoft.

Yahoo’s operations trade for just $5 to $6 per share out of its current $15 share price, once you exclude its Asian investments and the value of its cash. Its hidden assets in Japan and Chinese affiliates — Yahoo Japan Corp and China’s Alibaba Group — alone are worth around $6 to $7 per share.

The trouble is that Yahoo needs to find a way to cash out of its increasingly rocky relationship with Alibaba Group, in which it holds a 39 percent stake after it pulled back from operating its own business in China in 2005.

Yahoo’s best chance here may come next year if Alibaba succeeds with a second IPO of its Taobao.com consumer ecommerce site, building on the success of the 2007 IPO of Alibaba.com, now valued at more than US$13 billion on the Hong Kong exchange.

Truth be told, Yahoo’s huge success in building the biggest U.S. Internet media destination never translated very well overseas, despite the early foray into Asia that left it with lucrative assets in Japan and China. These passive investments came to substitute for a global operating strategy.

But that’s changing now, as Yahoo once again has begun investing in international operations it can fully control.

In its latest such push, Yahoo said on Tuesday that it would buy Maktoob.com, the largest Internet media site for the Arab world, with an estimated 16.5 million users. Terms were not disclosed.

Yahoo’s international stronghold is Asia, where it had 172 million unique users in the month of June, according to industry estimates. It is the top player in Japan through its stake in Softbank-controlled Yahoo Japan, and is dominant in Taiwan and Hong Kong as well.

In India, Yahoo has the most visited home page and is the most popular provider of e-mail, instant messaging and online news to consumers. In a country mad on the sport, Yahoo operates the most popular site for cricket fans. Yahoo had 23 million unique monthly users in India in June, according to market researcher comScore.

But Yahoo stock gets little to no stock market credit for these international operations. Converting market share into meaningful financial results will take years. First, Yahoo must develop its patchwork of leading properties in places like the Philippines and Vietnam and Latin America into a global franchise. And it’s hard to see how Yahoo can regain lost ground in Europe’s more developed Internet markets.

Until now, the trap for Yahoo has been that much of its international value remains latent, locked up in investments in Japan and China rather than in operating businesses it controls. That is changing, slowly.

This leaves Yahoo at the mercy of an eventual rebound in U.S. advertising markets. For the foreseeable future, any significant rebound in Yahoo’s share price depends on conjecture over the still unknown potential of getting into bed with Microsoft.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article, with the exception of a token Yahoo share. He may be an owner indirectly as an investor in a fund. –

– Eric Auchard is a Reuters columnist. The opinions expressed are his own —

The stock price seems to be the only thing growing at Hewlett-Packard, the world’s largest computer company. HP shares have risen 75 percent this year, despite few signs of a revival in technology spending.

The company, best known as a supplier of computer printers, has suffered a 19 percent drop in sales of hardware and ink supplies. In good times, this produced the bulk of HP’s profits, but it’s the financial engineering under Mark Hurd, the company’s chairman and chief executive, that seems to be the main driver now.

So far, he has cut 16,000 of the planned 25,000 redundancies. It has taken roughly $3 billion in restructuring charges. This has masked underlying sales and profit weakness in its personal and corporate computer divisions.

Excluding the impact of the acquisition of computer services company EDS nearly a year ago, the company’s remaining businesses declined nearly 20 percent during the fiscal third quarter ending in July.

Hurd remains vague about when the recession may hit bottom.

“We’re encouraged by the stability that we’re beginning to see in the market but not yet at a point that we’re ready to call it a turn,” Hurd told investors on a conference call following HP’s quarterly report.

The benefits from cost-crunching at EDS have kept the company muddling along through 2009. HP reported total revenue for its third quarter ended in July fell 2 percent worldwide, but grew 4 percent, excluding currency effects.

Investors, which have returned HP’s stock to $44 — near pre-financial crisis levels — are now counting on a 2010 rebound to support the stock.

Hurd says U.S. businesses appear to be spending again on new projects and upgrades of aging computer infrastructure. But Europe has yet to show improvement.

Europe, which accounts for nearly 40 percent of the Silicon Valley-based company’s global revenues, declined 12 percent in the latest quarter, hurt by the weaker dollar over the past year. This was partly offset by 8 percent growth in the Americas and strength in China.

“The U.S. is beginning to do refresh work and you’re seeing that show up in the numbers. Things are still not as robust in Europe,” Hurd said.

The company is deferring questions about its longer-term outlook until September, when it holds its annual analyst meeting. Outside of a strong cyclical rebound, HP needs to answer how it plans to grow after it finishes with cost cutting at EDS.

The danger next year could come from any success it shows in signing new, long-term contracts at EDS. That’s because upfront investments needed during the first year of big consulting deals can be steep, with payback only coming later in the life of what are typically five-year contracts.

Half of HP revenues now come from maturing businesses like printers and PCs. No cyclical rebound in these businesses can disguise the need for the company to reinvent itself in new growth markets. Restructuring magic tricks can’t support the stock much further.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. —

LONDON, Aug 13 (Reuters) - Once they were warriors battling one another on the digital battlefield. Nowadays, Microsoft and Nokia are worriers, huddling together for comfort.

The world's top phone and software companies need each other to compete with Apple, Google and Blackberry-maker Research in Motion (RIM), whose products increasingly define what users expect from phones and charge premium prices in consequence.

In the market for so-called "smartphones", Deutsche Bank estimates Apple and RIM now take home more than half of all profits, despite producing less than a third of high-end mobile phones. Nokia held a 45 percent share of the smartphone market in June, according to Gartner Inc. (Table 2 in Gartner release)

The news this week that Nokia will feature Microsoft's office software -- features such as Word and Excel -- on phones aimed at business users is symbolic of what is possible rather than significant in itself. It fell short of predictions in the gadget trade press that Nokia might introduce phones running on Microsoft's own Windows Mobile software.

But that doesn't mean their collaboration should be dismissed. There's more to this budding relationship than meets the eye.

First and foremost, Microsoft and Nokia say they are taking on the Blackberry email-phone, a must have among corporate professionals. So far the they haven't done very much, for all the big talk. But they have pledged to make Microsoft Outlook work smoothly on Nokia phones.

This is crucial in overcoming Blackberry's key advantage -- the underlying software that companies rely on to securely manage corporate e-mail.

The opportunity here is that corporate technology managers are no longer content to supply only Blackberry devices but are gearing up to support a wider range of devices and software systems, reflecting shifting user tastes and demands.

Microsoft and Nokia need one another because despite being leaders in their respective fields -- computer software in Microsoft's case and phones for Nokia. But these powers have not translated into dominance in the era of converged devices.

To some extent, they have themselves to blame. The two giants spent the first half of the decade at war with one another over Microsoft's bid to enter the mobile phone business with its Windows Mobile software and Nokia's half-hearted attempts to do the reverse and expand its presence in computer
markets.

Years of legal and technology standards battles resulted in a stalemate. Windows-based phones number only a little over 20 million in a market of billions, and Nokia has made only tentative steps to enter computer tablet or netbook computer markets. Nimbler rivals have exploited these distractions.

Microsoft isn't the only technology giant Nokia is cuddling up to. In June, the Finnish company announced that it would team up with computer chip king Intel Corp on chips for future phones. Nokia was careful this week to underscore that the Intel deal is about future generations of Nokia products while the Microsoft ties are for phones in the here and now.

Whether or not Nokia sells some Windows-based phone models or Nokia eventually introduces a mini-netbook computer running Windows software is largely irrelevant to the central problem these two companies face.

Microsoft and Nokia must create differentiated products that help users do things Apple and Research in Motion cannot do. Otherwise these two giants face marginalization in the era when phones become computers.

You can read some of Eric's recent columns here.

(Photo: Reuters/Vivek Prakash, Singapore)

Technology market research firm Gartner Inc has published the 2009 "Hype Cycle for Emerging Technologies," its effort to chart out what's hot or not at the cutting edge of hi-tech jargon. It's just one of an annual phalanx of reports that handicap some 1,650 technologies or trends in 79 different categories for how likely the terms are to make it into mainstream corporate parlance.

Jackie Fenn, the report's lead analyst and author of the 2008 book "Mastering the Hype Cycle," delivers the main verdict:

Technologies at the Peak of Inflated Expectations during 2009 include cloud computing, e-books (such as from Amazon and Sony) and internet TV (for example, Hulu), while social software and microblogging sites (such as Twitter) have tipped over the peak and will soon experience disillusionment among corporate users.

Click to enlarge

What's most interesting in the report, now in its 14th year, is what the corporate research firm says is a long way off from the mainstream.

It will take up to five years for many of today's trendy technologies to become mainstream, including Web 2.0, cloud computing, Internet TV, virtual worlds, and a true corporate mouthful, service-oriented architecture (SOA).

Funny how long hype cycles take to pay out. Three years ago, in its 2006 Hype Cycle Report, Gartner predicted Web 2.0 would go mainstream within just two years.

More than five years out, which means nearly dead in terms of industry attention, are technologies such as the once hot radio-frequency ID (RFID) concept, along with mobile robots and human augmentation and some absurdly high concepts like context-delivery architectures.

The second chart, on the right, describes Gartner's methodology. It's all very imprecise, but a game worth playing.

Images: Gartner (August 2009)

Emerging Technology Hype Cycle archives
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

LONDON, Aug 3 (Reuters) - The resignation of Google CEO Eric Schmidt from Apple's board should come as no surprise to anyone with an inkling of what corporate governance means.

But then Silicon Valley's idea of corporate boards has long consisted of cozy, interlocking directorships which would be considered collusion in most other industries.

Google's CEO is not leaving Apple's board voluntarily. He is only stepping down in response to the increased government scrutiny of obvious potential conflicts of interest between the two companies.

Yet regulators shouldn't be content with Schmidt's departure. The truth is that Apple and Google have been heading into the same markets for years. A veritable chain of overlapping business ties remain in place even if the most obvious formal link is now broken.

The chairman of Apple's board, former Genentech CEO Art Levinson, remains on Google's board. Another Google board member, Ann Mather, is the former chief financial officer of Steve Jobs' former animation company, Pixar Studios.

Paul Otellini, the CEO of Intel Corp, Apple's main chip supplier, also sits on Google's board. Al Gore remains on Apple's board, but in his new turn as venture capitalist he has many business ties to Google and its founders. Gore is a partner of Google board member John Doerr at legendary Silicon Valley VC firm Kleiner Perkins.

For months, the U.S. Federal Trade Commission has been examining Schmidt's participation on the boards of the tech world's two most dynamic companies. Last week, the Federal Communications Commission said it was looking into Apple's decision to reject a Google phone application to run on the iPhone.

Google's CEO says he has consistently recused himself from Apple board discussion of the iPhone. There's no reason not to take him at his word. But that's largely a distraction from the bigger issues at stake here,

Schmidt need not have participated actively in iPhone discussions. By taking part in discussions of the rest of Apple's strategy, Schmidt was in a position to steer Google's own strategies around the Apple juggernaut. Rivals need not cooperate directly to divvy up markets.

Anyone following the industry knows that Apple and Google have been moving in similar directions since well before Schmidt joined Apple's board three years ago. As computers become more like phones and the Internet becomes more mobile, the competition has become only more obvious.

By August 2006, both companies were hard at work on their plans to enter the mobile phone market. In September 2005, Apple made its first failed foray into the market with a joint development effort with Motorola that led to the introduction of the Motorola ROKR iTunes phone.

A month before -- and a year before Schmidt joined Apple's board -- Google had acquired mobile device start-up Android, forming the genesis of its own push into mobile phone markets.

Six months after Schmidt became a director, Apple unveiled its ground-breaking iPhone, in January 2007. Fevered speculation mounted throughout 2007 that Google was working on its own so-called GPhone.

In November of that year, Google introduced its Android software for mobile phone development. In September of 2008, the first Android-powered phone built by Taiwan phone maker HTC for T-Mobile was introduced.

So far, Apple has been content to attack the high-end of the smartphone market. Google is aiming at the mid-priced phone market and new mini-notebook computers with Android. But the conceit that the two companies aren't competitors is wearing thin.

Reforming corporate boards has never been easy in Silicon Valley. Recall the boardroom battles that cost former Hewlett-Packard CEO Carly Fiorina her job. They pitted H-P's old guard against corporate governance advocates who were Fiorina's allies. The decline of Yahoo is another obvious example of failed board governance.

Independent corporate governance is an afterthought in the go-go corporate culture of Silicon Valley, where entrepreneurs backed by venture capitalists launch start-ups. Even years after an IPO, the founders and their VC backers typically keep disproportionate control over "their company."

Investors bear no small part of the blame. Most care only in retrospect, once rocket-fueled growth subsides and the shares of former high-tech stars fall back to Earth.

For now, both Apple and Google shares are moving higher, as the tradition of weak corporate governance looks set to survive a while longer.

(Photo: Reuters/Kimberly White)

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Pundits have been talking endlessly about the possible green shoots of recovery in the ravaged world economy.

But early shoots are not always green. They might want to consider the problem of black shoots. These false starts are familiar to lily growers, when a temporary rise in soil temperature occurs after a cold period.

In the technology world, recent signs of restocking have been proclaimed as evidence of green shoots. Investors wanted to be persuaded and this has helped propel global tech indices 50 percent higher in the past three months.

But a collection of many of the world’s largest wholesalers of technology attending the Global Technology Distribution Council’s annual European conference are bracing for tough times rather betting on any early recovery. They are in the black shoots camp, rather than the green one.

These electronics distributors sit between buyers and sellers and are among the best positioned to know whether inventory from computer chips to phones to PCs are moving.

Far from seeing inventory restocking, they are planning ahead for years of slack growth, tight technology budgets and higher credit risks from customers.

The industry handles an estimated $300 billion worth of technology products and another $50 billion in electronic components, or more than a quarter of the $1.2 trillion of such goods shipped each year, according to Goldman Sachs.

As middlemen, they have played a decisive role in keeping inventory levels tight, averting the glut of unsold products that have occurred in all prior tech downturns.

At the London meeting, CEOs of the world’s biggest distributors said the supply chain was moving again after nearly grinding to a halt earlier this year, but cautioned that this may just be a statistical bounce after the steep plunge late last year. Sales by U.S. distributors fell 43 percent between June 2008 and April of this year, according to data cited by the trade group Global Technology Distribution Council.

What technology sales data suggests so far this year is the end of the destocking phase and the return of production and some sales activity. But at far lower levels than a year ago. Many of the promising restocking anecdotes confuse normal seasonal patterns with actual underlying growth in demand, top distributors say.

“I fundamentally do not believe restocking is going on,” says Roy Vallee, CEO of components distributor Avnet , which posted nearly $18 billion in sales last year. He sells billions of tiny parts that get crammed onto printed circuit boards and end up in finished electronics.

“Outside of China’s indigenous demand, which is being driven by their stimulus package, where else is demand actually up?” Vallee told me in an interview. “It’s certainly not here (Europe), not the U.S, not Japan, so what we have is not restocking. It is a supply chain ordering again but ordering at a lower level than six months ago,” he said.

Greg Spierkel, chief executive of Ingram Micro , which with sales of $34 billion last year is the world’s biggest hi-tech distributor, says the world is only slowly coming to grips with lower longer-term growth rates. He’s not looking for technology spending growth rates of recent years to recover until 2011 or 2012.

To bolster sales, vendors that distribute through the Ingram Micros and Avnets of the world have increased the amount of financing they make available to technology buyers. Despite the availability of such working capital, Spierkel says customers are reluctant to take on new debt. There is also a significant increase in credit risk from customers downstream.

These distributors are adapting for an era of lower sales volumes by cutting staff and overhead costs themselves. No one here is talking about green shoots, only how to help customers eek out more savings on the costs of procurement.

The technology industry is not alone in its exuberance for green shoots thinking. However, as it is considered a leading indicator for for many parts of the economy, the evidence of black shoots, of false starts to a wider economic recovery, calls into question green sightings elsewhere.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. –

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Apple Inc is taking steps to make its computers run on corporate networks, but these moves fall far short of ensuring Mac users win equal standing in business.

Full corporate access for Apple computers inside businesses remains years away. If and when it comes, acceptance is more than likely to be the result of broad trends reshaping the office computer market, rather than Apple’s own product genius.

This week, the reigning consumer king of computers, music players and smartphones showed off a new operating system, dubbed Snow Leopard, with a handful of tantalizing features built for business.

The new software, due out later this year, will connect Macs to Outlook e-mail systems running Microsoft Exchange — the way that most office workers manage their e-mail, calendars and contacts.

In doing so, Apple is addressing a key issue in the classic Mac vs PC debate over whether its machines are practical for office tasks.

Of course, multimedia-rich Macs already predominate among graphic artists and many Web software designers. And Apple computers are popular with small and medium-sized businesses with skeletal technical staffs.

However, in large organizations, personal computers running Microsoft Windows software remain, by and large, the only option. This is primarily due to cost: Business PCs are half the cost of any Apple machines.

Any notion that Apple can dance its way into offices ignores the fact that corporate technology adoption is not a matter of individual choice but under the rather rigid control of technical administrators. This power extends not just to networks or computers but down to the programs staff use or even what Web sites they see.

Macs, which provide great consumer security protections, lack essential features corporations demand. Nothing Apple has said suggests the company is going to address these vulnerabilities soon.

Beyond the cost of the machine, the network tools for managing complex combinations of servers, desktops and notebooks and storage devices often are kept track of using technologies such as Microsoft’s Active Directory. In hundreds of unseen ways, Apple Macs remain a far cry from standard corporate issue.

But there are other factors that may work in Apple’s favor. Office workers increasingly spend more of their time working on the Web searching for information, checking e-mail, ordering products, watching corporate training videos or listening to Webcasts. Instead of using standard desktop applications, this activity all happens inside browsers and is delivered via network servers rather than being powered by local machines.

Apple machines, with easy-to-use software, slick audio and video features and simple wireless access, have many advantages in this emerging way of working.

Another technology known as visualization gives corporate managers the ability to treat every contact that computers have with their networks as discrete events that can be far more precisely managed. It matters less and less what brand of notebook, Blackberry or other computer device is connecting.

Many companies are moving to a model where they no longer expect only company-purchased devices on their networks. There are too many different work roles requiring too many devices to keep up with it all.

Instead, using a mix of software security techniques, they can grant employees specific access to their office network data from a range of locations and devices, in the office, on the road and at home.

There is growing acceptance that office employees may be working on their own computers, from home or wherever else they may be. This is in part because companies want to save money on providing PCs. It is another potential opening for Apple.

Twenty years after Apple largely conceded the business computing market to Microsoft Windows and PCs, Apple is making tentative steps to once again win acceptance for its machines in corporate offices. Whether or not Mac users win equal footing in business will depend less on Apple’s own initiatives than on management choices that companies are already making.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. –

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Stock research analysts get no respect these days. An academic study has concluded that share recommendations have little impact.

A 51-page study entitled “On the information role of stock recommendations,” finds that buy and sell ratings are uninformative and often try to “piggyback” on actual news for their influence. This begs the dismal question: if professional analysts can’t get it right, what hope for the ordinary investor? Click here for PDF.

Sell-side research — driven by the need of the analyst’s employer to trade stocks — dominates daily market conversations. Recommendations are the signposts of these debates, without which many investors would be lost.

Analysts are not alone in selling their independence to the highest bidder, and their reputation has suffered after so many were exposed as marketers for investment bankers, favoured clients or company managements. But independence is not the same as efficacy of stock recommendations.

Equities analysts are not unique in showing herd behaviour Oya Altinkilic of the University of Pittsburgh and Robert S. Hansen of Tulane University are correct to protest that stock ratings too often rely on past returns, and are poor indicators of future performance.

However, stock ratings are only a distillation of the analysts’ work. Their reports help investors make sense of announcements and prepare them for upcoming news. As with journalism, there is plenty of slip-shod analysis, or useless ratings changes made after the fact. Yet investors depend on analysts for a lot more than binary buy/sell ratings.

The methodology may explain the findings. The data measured the impact of ratings changes only for the 20 minutes before and after analysts published new recommendations.

The Pittsburgh/Tulane duo might instead have interviewed directors of those thousands of companies which are not covered by any analyst. Their stocks often have zombie status, with low ratings and no trade, because investors fear they will never be able to sell if they buy.

Analysis is not a road to riches from blindly following recommendations, but it oils the wheels of share trading, and the last year has shown what happens when liquidity dries up.

Rather than produce trite conclusions from some questionable research, the researchers might investigate why so many analysts are leaving the business under the pressure of compliance and regulation. Their loss makes markets poorer, whatever their recommendations.

- Eric Auchard is a Reuters columnist. The views expressed are his own –

If you look no further than the latest headlines, you might think a worldwide flu pandemic was already underway with a very real threat to millions of lives.

While there are many unanswered questions early on in the outbreak of flu from Mexico, it is crucial to remember that the number of deaths and reported infections remain small — even if its spread across the globe has proved worryingly rapid.

While the infected need access to medical care and anti-viral drugs, the rest of the world needs an inoculation against scary statistics and misinformation.

The Internet Age allows facts and rumour to spread almost instantaneously. But knowing of outbreaks across the globe must not be confused with risks of catching the disease.

Already in this outbreak, Lebanon’s health minister has called for a halt to the national custom of greeting one another with kisses. Several countries including Russia and China have banned pork imports from Mexico and parts of the United States in the belief that meat could spread the flu.

So far, up to 149 are reported to have died of swine flu in Mexico. The World Health Organisation has upgraded the level of pandemic threat to four on a scale of six — sustained human-to-human transmission. Stage five signals an “imminent” pandemic.

However, influenza is a big killer every year, with or without a pandemic.

WHO estimates flu kills upward of 250,000 to 500,000 people year after year. “Normal” flu epidemics infect 3 to 5 million a year. Statistics are complicated by inconsistent reporting. Flu often leads to other ailments that end up being listed as the ultimate cause of death.

Flu’s typical victims are the elderly, the infirm or the young. The difference with swine flu outbreak in Mexico is that otherwise healthy adults aged 20-50 are vulnerable.

But so far the new swine flu death rates are lower than other recent pandemic scares, a report by Barclays Capital notes. The 2,200 swine flu infections reported have resulted in deaths in 7 percent of cases. Avian flu has killed 61 percent of the 421 people infected since 1997. The death rate from SARS was around 10 percent.

Outside Mexico, 50 infections have been reported in the United States, Canada, Israel, New Zealand, Spain and Scotland. But health experts are baffled that infections outside Mexico appear to be milder and have caused no deaths.

The world’s most recent flu pandemic 41 years ago was the 1968 Hong Kong outbreak, which claimed one million lives.

Historically, pandemics occur about three times a century. But like predictions of the next big earthquake, medical experts profess they have no idea when to expect the next pandemic.

Inevitably, comparisons end up turning back to the Spanish Flu of 1918-1920, which killed more than 50 million people, or 2.5 percent of the world’s population.

That scourge followed the massive troop movements of World War One at a time of poor communications and before the invention of penicillin and modern healthcare systems. Post-war censorship rules restricted access to news, which limited the ability of communities to make informed decisions to protect themselves against the spread of the flu.

The descent into a global pandemic is not inevitable. Air travel may spread the disease in its early stages, but modern communications and medicine can arm us to respond quickly as the disease evolves.

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Once in a while a good computer security scare comes along that has all the makings of a taut Cold War spy thriller and the latest news of a global computer espionage ring is one such story.

A new report entitled “Tracking GhostNet: Investigating a Cyber Espionage Network,” argues that poorly defended computers used by government and private organizations in 103 nations may have been violated. The study has attracted widespread media attention after a New York Times story about it at the weekend.

The study by a group of activist researchers based in Toronto called “Information Warfare Monitor” says computers in various foreign ministries, embassies and Taiwanese trade groups have been pilfered by computers located at a Chinese government intelligence center on the island of Hainan. A computer in the private offices of the Dalai Lama was infected and e-mail lists and negotiating documents were stolen using a virus that “phoned home” to its controller, it alleges.

Data retrieved in the attacks appears to have been used to rein in Tibetan critics of China. But the report has trouble pinning the theft of computer secrets back to the Chinese government. It is also unclear how much information of value was gathered, outside a handful of instances. It conflates evidence of sniffing with acts of actual snooping.

A spokesman for China’s Foreign Ministry has dismissed the report’s claims as rumor and said his government was committed to protecting Internet security. “There’s a ghost abroad called the Cold War and a virus called the China threat,” ministry spokesman Qin Gang told a news conference.

In fairness, the researchers acknowledge up front that its findings raise more questions than answers and that it is “not clear whether the attacker(s) really knew what they had penetrated, or if the information was ever exploited for commercial or intelligence value.” It says that proving who is responsible for cyber attacks remains a major challenge — what experts refer to as the “attribution problem.”

The report was conducted at the request of the office of the Dalai Lama and Tibetan exile organizations, who have long accused the Chinese government of using cyber war to disrupt their activities. It describes the sophisticated techniques used to infiltrate the computers of the offices of the Tibetan government-in-exile. But the connections it draws to a wider global spy ring are sketchy. Some of the break-ins may be explained by shoddy computer maintenance.

In cyberliterature, the bad guys, typically unknown, break into vital government, military, banking or political organizations and cause immeasurable damage or steal uncounted billions of dollars. Throw in contemporary geopolitical rivalries and references to the latest techno-jargon and the formula is more or less complete.

To be sure, international computer security experts have seen the hand of Chinese hackers in growing number of computer intrusions around the world in recent years. The global scale combined with the sophisticated targeting of specific computers by GhostNet make most efforts at wiretapping government opponents scrawny by comparison.

But China is not alone among major world governments in viewing cyber warfare as a tenet of national security. To an unknown degree, for example, the United States, Israel and Britain snoop not just on their enemies but also their critics.

The problem with much of the writing about computer security is that it conflates basic issues of computer hygiene with diabolical threats to society or the economy. In the virtual world, teenage vandalism of web sites blurs into acts of terror. Police and government officials don’t help by painting the Internet’s inherent tension between openness and security as a danger to public safety.