The networking equipment giant is looking to jump-start a nascent business by culling interest and support from a wide array of partners for a proposed technology standard, ideally helping in the development of new wireless networks. A standard is a kind of industrywide blueprint for a given product, agreed upon to ensure products made by different companies are interchangeable for end users.
The firm also plans to unveil new products based on the still-developing technology by the end of this year, according to company executives.
The San Jose, California, firm, which reported revenues of $12.15 billion in its most recent fiscal year, aims to tackle a niche that has not been one of its strengths. But an early indication of Cisco's interest in voice, video, and data communications over high-speed wireless technology came from a Net-focused wireless alliance with Motorola that debuted in February.
"We're trying to speed up the market for this technology," said Steve Smith, director of marketing for Cisco's broadband wireless division.
In its latest initiative, Cisco has enlisted the help of component providers such as Broadcom and Texas Instruments, consultants EDS and KPMG, and equipment providers Motorola, Toshiba, and Samsung. The goal is to develop use of a high-speed standard for a fixed wireless technology called Vector Orthogonal Frequency Division Multiplexing, or VOFDM, according to company executives.
The VOFDM standard was created from technology Cisco acquired last year when it bought Clarity Wireless for $157 million in stock. It is intended to complement or provide an alternative to land-based cable or digital subscriber lines (DSL) for service providers.
Cisco said the technology could prove useful in areas where there aren't any existing high-speed networks. For example, a company such as cable-based Net access provider Excite@Home could use the technology to connect its cable equipment to its "backbone" network in certain areas, according to executives.
Other companies interested in deploying similar technology include Sprint, MCI WorldCom, and BellSouth, executives said.
Smith said Cisco plans to provide wireless equipment for business offices and for communications companies.
Sun's Solaris operating system is running on prototypes of Intel's upcoming 64-bit chips, becoming the last of the major server computer operating systems to do so.
Sun Microsystems was beaten to the punch by Microsoft, IBM, Hewlett-Packard, and the collection of programmers working on adapting the Linux operating system to run on the forthcoming chip. The processor had been code-named Merced but now is called Itanium.
The only reason for Sun's lag was that it's hard to get access to the Intel prototype hardware used to test out software, said Jonathan Han, product manager for Solaris on Intel. Solaris is Sun's version of the Unix operating system.
"Unfortunately, hardware access has been the gating factor," Han said. Once the company got access, it took less than a week to get Solaris working on the new chip, he said.
Getting established operating systems up and running on a new chip is a critical stage in creating products for any processor. An operating system, the special software that's in charge of a computer, is needed before higher-level software such as a financial application or image editor can run.
The Itanium will be the first in a new line of chips that will form the "IA-64" family, a new architecture originally conceived at HP. Intel says it will have room to outgrow current high-end chips from IBM, Sun, and Compaq Computer, among others.
A version of Windows and Linux were demonstrated when Intel unveiled the first Itanium samples in late August. HP said in September that its version of Unix, called HP-UX, was running on the Itanium prototype.
IBM had passed a similar milestone for its new operating system about two weeks earlier, called Monterey-64. Monterey-64 is a combined version of the Unix products from IBM, the Santa Cruz Operation, and Sequent, a server maker IBM acquired.
The Unix landscape got a little simpler last month when Compaq reversed its plan to translate its Unix, called Tru-64, to the IA-64 chips. Instead, Tru64 will work only on Compaq's Alpha chips.
Sun's servers and workstations are based on Sun's own chip, the UltraSparc, but the company also sells the Solaris OS for Intel chips. However, the current Intel version of Solaris is less powerful, running only on 32-bit chips, whereas the UltraSparc version of Solaris runs on 64-bit chips. A 64-bit operating system is able to deal with much larger amounts of memory and much larger databases of information, important factors for high-end systems that handle tasks such as keeping track of all of a large company's accounts.
The advent of the new 64-bit chips from Intel means it will be easier for software companies to make sure their software runs on Intel and UltraSparc system. Software will be about 95 percent alike for the two systems, Han said.
The arrival of a 64-bit Solaris on Intel chips won't cause Sun to change its Solaris strategy, Han said.
Liberty Media Group, AT&T cable TV programming company, agreed to pay $425 million for a 31.6 percent stake in the satellite venture Astrolink to add to its broadband distribution network.
Astrolink was founded three months ago with $900 million from Lockheed Martin, TRW, and Telecom Italia SpA's Telespazio unit to provide high-speed Internet access and other so-called broadband services to customers around the globe over a satellite-based wireless network. The transaction is expected to be completed within 30 days.
The investment by Englewood, Colorado-based Liberty adds a partner with programming and Internet content assets and expertise to the venture, which expects to begin offering services in 2003. The venture won European Union approval in June, and will first offer services in the Americas, Europe, and the Middle East.
"Astrolink provides a unique opportunity for Liberty to invest, with a strategic set of partners, in a global distribution network," Liberty chief operating officer Gary Howard said in a statement.
Astrolink said its business and residential customers will use small satellite dishes to connect to the network, which will focus on carrying Internet traffic, handling internal corporate data networks, and other communications services. Bethesda, Maryland-based Astrolink is set to launch a geostationary Ka-band satellite in 2002, with three additional launches at six-month intervals.
After the companies' investments are completed, Lockheed's Global Telecommunications unit will have a 31.2 percent stake; Telespazio and TRW will each have 18.6 percent stakes.
Lockheed Martin, the biggest U.S. defense contractor, will provide spacecraft, systems Integration, and launch services. Telespazio will supply ground equipment and operate control systems. Telecom Italia, Italy's biggest telephone company, will market the company's services in Europe and Latin America.
TRW, an aerospace and vehicle components company, will build communications equipment for the satellites.
Englewood, Colorado-based Liberty, led by John Malone, owns stakes in Discovery Communications, QVC, and USA Networks, and has been making investments in companies such as Astrolink that could boost the audience for its programming. Liberty already holds 22 percent of the United Kingdom's No. 2 cable operator, Telewest, and half of Ireland's second-largest cable network, Princes Holdings. It also owns stakes in cable programming businesses in Britain and Europe, and last week bought Cable Management Ireland for an undisclosed sum
Today, it agreed to buy a 14 percent stake in Emmis Communications for $150 million, its first radio broadcasting investment.
Copyright 1999, Bloomberg L.P. All Rights Reserved. CarPrices.com plans to unveil a new service that will link shoppers with car dealers in a so-called reverse-auction format.
To use the free service, set to debut on November 1, consumers specify what car they are shopping for, including options and accessories. Dealers will then send shoppers binding bids on the cars, according to company executives.
The format will differ from many of the existing players in an increasingly competitive online car market, which includes Priceline, Autobytel, AutoWeb, and others. Recent studies indicate that 40 percent of new car buyers are using the Internet to shop for a car.
Unlike Autobytel and AutoWeb, which refer buyers to only one dealer within their network, CarPrices.com promises to provide consumers with multiple bids from different dealers. Unlike Priceline, consumers don't have to commit to buying the car through the service and don't have to tell dealers what they are willing to pay.
Like many of its rivals, however, CarPrices.com will be limited geographically, serving only the San Diego area when it launches.
Company cofounder Ahmed Ghouri said CarPrices.com has "aggressive" expansion plans. Although he declined to say when the service would be available in other areas, he would not rule out moving into another, new market by the end of the year.
"A national [launch] is right now being planned," Ghouri said.
CarPrices.com plans to make money by charging dealers for putting them in touch with car shoppers. But Chris Denove, director of consulting operations for J.D. Power and Associates, said both dealers and consumers may be reluctant to use CarPrices.com's service, though it is free for the latter.
Consumers can get bids on their own by sending email directly to dealers, Denove said, while price-conscious car shoppers may find that the bids they receive are higher than what they want to pay. Meanwhile, dealers will inevitably pass on CarPrices.com's charges to car buyers, Denove predicted.
Dealers also may be reluctant to use a service that compares their prices head-to-head with those of competing dealerships. "I expect that they're not going to have a lot of dealer cooperation," Denove said.
Ghouri dismissed such concerns. CarPrices.com has already signed up about 75 percent of the dealers in the San Diego area, he said.
Consumers will benefit by receiving "rock-bottom prices" on cars, he added. "It's a price war that benefits consumers," Ghouri said.
Other sites using the reverse-auction format include Imandi.com and BizBuyer.com. However, those two sites focus on services such as house painters and long distance service providers, and have not yet ventured into online automobile sales.
After an outcry from customers, Microsoft has decided to reinstate a free program where high-tech professional volunteers provide technical help and other services.
Microsoft reversed its earlier position, telling users today that it will not shut down the program as it had planned. Microsoft initially said the effort, dubbed the Most Valuable Professional (MVP) advocacy program, would end as part of its efforts to revamp its MSN online newsgroup program.
The Most Valuable Professional program offered advice from professionals who voluntarily assisted customers on technology developed by the software giant. They've also acted as Microsoft's unofficial ambassadors at product launches and trade shows.
"Clearly, the feedback received recently is in strong support of the MVPs," an email sent to the MVPs said today. "Based on this feedback, we will reinstate the MVP Program effective immediately."
In addition, Microsoft will expand the program to add an "advisory council" to improve the MVP service, the company said. The turnaround was prompted by an "overwhelming" amount of customer feedback, a spokesperson said.
The company offered few details on why the program was terminated in the first place. "Microsoft is reevaluating its newsgroup program based on customer feedback," a Microsoft spokesperson explained previously.
Microsoft circulated a memo informing MVPs of its decision to pull the plug on the program. The company was planning to integrate the MVPs into Microsoft, staffing newsgroups with Microsoft employees.
The controversy could have been prompted by the company's desire to improve its relationship with software developers. Microsoft officials have said they are more concerned than ever with increased competition for software developers.
Company president Steve Ballmer said earlier this year that the combination of Internet technologies, the Java programming language, database-driven application development, and growth in use of the Linux operating system is threatening Microsoft's ability to attract programmers to Windows.
According to the first memo, the "shift in focus in the newsgroups will allow the company to respond to customer requests for more contact with Microsoft support professionals and guaranteed response times."
Have reports of the U.S. Postal Service's demise been greatly exaggerated?
First-class mail is expected to begin declining by 2003 in the face of email and electronic bill-paying, according to a General Accounting Office (GAO) report delivered to the House Subcommittee on the Postal Service last week. Based on projections provided by the USPS, the document says the Internet could wipe out $17 billion in postal service revenues and threaten the agency's ability to provide universal first-class mail service.
Also last week, however, the USPS announced a new vice president for ePayments, a new online division. The move followed the September launch an online marketing deal with Amazon.com to boost the federal agency's presence as a major player in the burgeoning e-commerce delivery business, and came on the heels of August's debut of a new service, PC Postage, to let consumers print stamps directly from desktop computers.
The GAO's gloomy outlook further contrasts with the fact that the USPS expects to announce a record fifth consecutive year of profits on record revenues of $62 billion.
Few doubt that the Internet is forcing a major transition in the postal service. But while some worry the agency is slipping into irrelevancy, competitors have come forward with complaints that it is unfairly extending its monopoly advantages into new businesses that have little to do with delivering the mail.
"We will revolutionize the way we grow the business, manage the mail, build on our strong Internet presence, and earn our share of the growth in e-commerce business by becoming the carrier of choice for merchandise purchased or returned through the Internet," Postmaster General William Henderson said in a statement last week.
"The GAO report is not saying that the postal service is all that fragile," said James Cameron, a lobbyist in Washington, D.C., representing Federal Express. "It is really saying that the postal service will hit a wall unless the rules of competition are changed."
Bills to strike a balance
The issue has gained the attention of Congress, where at least two bills
have been introduced to help keep the USPS viable while ensuring it doesn't
squeeze out competition in emerging businesses. H.R. 2535, introduced by
Rep. Henry Waxman
(D-California), and H.R. 22, by Rep. John McHugh (R-New York), would
give the USPS greater flexibility in setting postal rates and set ground
rules for the USPS to enter non-postal markets.
H.R. 22 has won support from several influential lobby groups, including FedEx and the Newspaper Publisher's Association, and for now it appears to be the front-runner. Under the bill, the postal service would be allowed to enter new businesses, such as electronic bill-paying, only by setting up a subsidiary that would compete under the same rules as private companies.
The bill "would position the postal service to allow it to compete and give it greater flexibility to set rates, balanced with provisions requiring it to compete on a more level playing field, " said Dana Johnson, McHugh's press secretary.
H.R. 22, which was approved by the House Subcommittee on the Postal Service, still faces some hurdles. Henry Black, a spokesman for United Parcel Service (UPS), said his company believes the bill doesn't go far enough in addressing competitive concerns.
"The postal service wants to have it both ways," he said. "They wail about how the sky is falling, that they can't survive the Internet and email unless they expand into other lines.
"At the same time, they refuse to acknowledge they're getting special treatment, from paying zero taxes to not paying parking tickets. Congress has to act, but H.R. 22 doesn't produce a level playing field."
Even if online bill payments seem destined to cut into the USPS's future revenue, there are some bright spots.
The junk mail boon
Direct marketers are increasing their reliance on junk mail, for example,
which last year accounted for 44 percent of all pieces of mail handled by
the post office. In addition, the e-commerce boom is increasingly shipping
through the post office.
Leading online retailer Amazon, for example, has said that 65 percent of its customers choose the USPS's Priority Mail option for shipping. Amazon and the USPS teamed up last month for a TV and print advertising campaign to promote the postal service.
In launching PC Postage, meanwhile, the agency joins numerous private-sector companies that hope to stake a profitable niche on the Net.
Online stamp sellers in the private sector don't seem deterred by the GAO report. They are building powerful business alliances and marketing new services that go beyond providing stamps via the Net.
Stamps.com and E-stamps are the only two private-sector companies approved by the USPS to sell stamps over the Net. Both companies are on Wall Street's radar.
In a deal worth $56 million, America Online took a stake in Stamps.com last week and gave it exclusive placement on its service. Stamps.com announced today that it will acquire iShip.com, a Net-based shipping technology, to build a one-stop mailing center for consumers and businesses. iShip's investors include UPS, Mail Boxes Etc., eBay, Intel, and venture capital firm Draper Fisher Jurvetson.
E-Stamp rose 32 percent on its first day of trading this month. Both Excite@Home and Microsoft have stakes in the company.
A representative for Stamps.com was not immediately available for comment. E-Stamp wasn't available to comment on the GAO report because it's still in its post-IPO quiet period.
But neither Stamps.com nor E-Stamp mentioned the threat of online bill payments cutting into stamp sales as risk factors in filings with the Securities and Exchange Commission.
Another reason online stamp sellers may not suffer from the prediction in the government report is because they are targeting businesses, not the consumers who are migrating to online bill-paying, analysts say.
"It's going to cut into everybody overall, but it will effect the post office more than these guys directly because they are branching out into other businesses," said Stephen Lacey of the IPO Reporter. "Businesses still need the ability to send things out in bulk and do it easily."
News.com's Courtney Macavinta contributed to this report. EL SEGUNDO--Computer Sciences, the third-largest U.S. computer services company, said fiscal second-quarter profit rose 23 percent thanks to a host of new contracts.
Net income in the quarter ended October 1 rose to $89.6 million, or 55 cents a share, from $73 million, or 45 cents, in the year-earlier period. That matched the average estimate of analysts polled by First Call. Revenue rose 15 percent to $2.13 billion from $1.85 billion.
Computer Sciences (CSC) said it won $5.3 billion in new contracts to help run other companies' computer systems in the first half of the fiscal year. Today, it said it expanded a $1.2 billion contract with United Technologies to include all of the company's information-technology systems in North America. The ten-year agreement, penned in May, is now valued at $2.1 billion.
El Segundo, California-based CSC ranks in the U.S. computer-services market behind IBM's Global Services unit and Electronic Data Systems (EDS).
Computer Sciences shares rose 0.69 to 60.19 today. The company released earnings after the close of U.S. markets.
The company's shares have fallen 6.3 percent this year on concern that the company will rebuff any takeover offer, no matter the premium, and that demand may be slowing for its services.
Copyright 1999, Bloomberg L.P. All Rights Reserved.
NetZero, which offers free Internet access to people who agree to see online advertising, said its fiscal first-quarter loss widened, although revenue doubled on advertising gains.
NetZero said it lost $14.9 million, or $1.04 a share, for the quarter ended September 30, compared with a loss of $8.2 million, or 72 cents, a year earlier. Revenue doubled to $7.72 million from $3.73 million.
NetZero is betting its free service will allow it to take on established Internet service providers such as America Online. AOL has more than 19 million proprietary subscribers.
Since starting its service a year ago, NetZero has registered 1.98 million customers. About 1 million of those accessed the service in September, the company said.
NetZero said it displayed 3.6 billion advertisements during the September quarter, compared with 1.8 billion ads the prior quarter.
The company said its per-share pro forma loss from operations was 13 cents a share. That assumes that the common shares that were issued and the preferred stock converted at its initial stock offering were outstanding for the entire quarter. It also includes outstanding shares subject to repurchase and excludes a $1.3 million charge for stock-based compensation.
The company was expected to report a pro forma loss from operations of 19 cents a share, according to the average estimate of three analysts polled by First Call.
The Westlake Village, California-based company first sold shares to the public last month at $16 each. Since then, its shares have increased 54 percent, giving the company a market value of $2.5 billion.
NetZero's shares rose 0.56 to 24.63 today. It released its results after the close of U.S. markets. Its shares rose as high as 26 on electronic networks and regional exchanges after the close of trading.
Copyright 1999, Bloomberg L.P. All Rights Reserved.
Ask Jeeves, which makes technology to search the Internet by asking questions in English, said its net loss widened in line with expectations amid higher costs in sales, marketing, and product development.
The Emeryville, California-based company's net loss was $9.3 million, or 37 cents a share, from a loss of $918,195, or 9 cents, a year ago. Excluding amortization of deferred stock compensation, the company said it lost $8.7 million, or 35 cents a share.
Analysts expected the company to lose 34 cents, the average estimate from five analysts polled by First Call. Revenue rose to $6.5 million from $113,000.
Ask Jeeves allows Internet users to find answers by searching the Web after they ask a question in conversational English. Its shares have risen 22 percent since it sold shares to the public July 1.
The company's consumer question-answering service comprised 66 percent, or $4.2 million, of total revenue. The corporate answering service was 34 percent, or $2.2 million, of total revenue.
Ask Jeeves said it is still on track to be profitable in 2002.
The company's shares fell 5 to 78. The results were released after the close of U.S. trading.
Copyright 1999, Bloomberg L.P. All Rights Reserved.
Compaq Computer said it has agreed to a five-year deal for Micron Technology to supply its memory chips.
The non-exclusive pact will make Micron the largest supplier of memory chips to the world's largest PC maker. The Boise, Idaho-based company is already the largest memory maker in the United States.
Sources close to Compaq valued the deal at more than $20 billion, although some analysts wondered whether the figure is too high.
Micron representatives told Warburg Dillon Read analyst Dave Bujnowski the deal is worth multiple billions of dollars over its five-year term. It appears to commit Compaq to buying a certain percentage of its memory chips from Micron, not an absolute number of chips, Bujnowski said.
About $20 billion worth of DRAM (dynamic random access memory) is sold each year, 70 percent of which goes to PC makers such as Compaq, said Seth Dickson, another Warburg Dillon Read analyst. Compaq's world leading PC market share totals about 13 percent.
The arrangement comes as recently rising DRAM prices squeeze profits out of PC systems.
Last week, Dell Computer lowered earnings expectations for its third quarter in part because of memory price increases. The Texas company told financial analysts on Monday that rising memory prices would add about $75 extra cost to every computer it sells.
Compaq is trying to combat fluctuations in memory prices by increasing its number of suppliers and aligning with one strong memory partner. The Houston firm also chose Micron because of its global distribution facilities, which it will use as it streamlines its own PC manufacturing operations.
"The agreement provides to our customers the amount of memory they are requesting for their systems. It also gives some stability…with regards to pricing," said Stephen Martson, Compaq's vice president and chief procurement officer.
Price increases have forced PC manufacturers to make hard decisions about the configurations they offer, either raising prices or cutting back on the amount of memory in systems. Dell said last week it has no choice but to pass the component price increases onto customers, who must decide if they want to pay extra for more memory. That means many systems may come with 64MB of memory, instead of the 128MB typical of higher-end computers.
Martson made it clear Compaq "would maintain current memory content across PCs" and that it "was not going to compromise" by giving less memory or charge more for systems.
"Compaq is the world's largest buyer of memory, accounting for 15 percent," said Martson. "This strengthens our position in terms of assuring supply to our customers."
Dell typically negotiates long-term contracts with component suppliers, which normally gives it some protection against price spikes. This has not helped with the recent drive up in DRAM prices.
Dell said it "dealt with a 100 percent DRAM increase in August, 100 percent in September, and 25 percent more recently," said Roger Kay, an analyst with International Data Corporation.
The agreement is obviously good news for Micron and the company's stock might well rally, but the memory maker must still worry about the price of memory, Warburg's Bujnowski said. Micron has posted losses in five of its last six quarters.
"We see it as a positive, but we don't see it as something that should make the stock go crazy," he said. "When I look at what truly should drive Micron's stock price, it's primarily DRAM prices."
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