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PAY CAPS FOR FEDERAL CONTRACTORS

The White House has proposed that large federal contractors cap the pay of their top executives to the average pay of top executives at their commercial counterparts.

The ceiling would affect pay for the top five executives in a company and for the top five executives in each of its major divisions according to a Feb. 28 memo from the White House's Office of Management and Budget to House Speaker Newt Gingrich, R-Ga.

The memo was attached to a draft bill responding to the defense authorization budget passed in 1996.

The measure faces well-organized opposition from industry executives, their lobbyists and supporting associations.

3COM-USR MERGER CREATES ALTERNATIVE TO CISCO

Whether or not last week's merger of 3Com, Santa Clara, Calif., and Dallas-based U.S. Robotics becomes a success in shareholders' eyes, customers will benefit, said analysts. "The industry is a lot better off than it was before," said Skip McAskill, senior analyst with the Gartner Group, Stamford, Conn.

"Customers now have a viable alternative to Cisco," he said. The increased competition should mean lower prices, McAskill said.

A 3Com spokesman said the company will be able to offer an end-to-end set of networking solutions. But McAskill and Alex Mendez, vice president of marketing for the enterprise unit of Cisco Systems, San Jose, Calif., said 3Com's real strength will be in the remote access areas.

Mendez said Cisco is not planning changes in response to last week's merger announcement. "But we continue to be paranoid about our competition," he said.

The merger of 3Com and U.S. Robotics creates a company that in 1996 had a combined total of $4.6 billion in revenues compared to Cisco's $6.5 billion in revenues that year. 3Com is purchasing USR for $6.6 billion, making the deal the second largest infotech merger ever after AT&T's purchase of NCR in 1990 for $7.8 billion.

INFOTECH BREAKS BOOM/BUST CYCLES, ECONOMISTS SAY

Not only is information technology an economic growth engine on its own but it also might be breaking the centuries-old economic theory that every boom is followed by a bust, according to financial analysts.

A panel of economists brought together by Time magazine said infotech is a major reason why there have been only seven months of recession since 1982.

One factor contributing to the growth is the use of just-in-time inventory practices in which firms can match production to demand and not carry large amounts of excess products, the economists said. High inventory levels often lead to production shutdowns and worker layoffs.

AT&T LAUNCHES NEW WIRELESS OFFERING

AT&T, Basking Ridge, N.J., will use licenses it has acquired from the Federal Communications Commission in the 10 MHz radio spectrum to launch a new fixed wireless communications service.

The system provides phone and Internet access to customers at a much faster speed than traditional copper wire, AT&T said. The company has been developing the technology since 1994 and plans to beta test it in Chicago later this year. AT&T Wireless Services will manufacture the equipment needed.

To access the service, a customer's home would be connected to an AT&T digital switching center through an antenna mounted on a pole. One antenna would be used by 2,000 homes. A receiver, which AT&T said is the size of a pizza box, would be placed on the back or side of the customer's house.

GOVT.'S YEAR 2000 PRICE TAG GROWS

Only four weeks after President Bill Clinton's budget said that the feds' year 2000 problem could be solved for $2.3 billion, federal managers sheepishly told Congress the cost had risen by at least $450 million - and will soon climb again.


Rep. Tom Davis, R-Va.

Under sharp questioning at a Feb. 24 hearing by Rep. Steve Horn, R-Calif., and Rep. Tom Davis, R-Va., government officials admitted they had underestimated repair costs, ignored the cost of replacing systems and excluded the feds' share of state and local year 2000 costs.

The officials also revealed that they hadn't estimated the cost of repairing some systems, including those operated by the Coast Guard and the Federal Aviation Administration.

Davis, whose Northern Virginia district includes many infotech contractors, chided federal officials for their slow response to the problem. "There will be devastating consequences for ... many of your [information technology] contractors" as existing or planned programs get slashed to pay for the hidden costs of the year 2000 problem, Davis said.

Another concern for industry is a proposed Federal Acquisition Regulation that would make companies liable for year 2000 fixes that fail.

The Information Technology Association of America is one of four industry groups that are protesting the proposal.


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