The suit, believed to be the first to charge that a software maker overstated the capabilities of a Year 2000 repair tool, alleges that from 1997 through 1999, Accelr8, its chief executive Thomas Geimer, president Harry Fleury and controller James Godkin made false claims about the utility of its Navig8 2000 software, Reuters reported.
The executives are also accused of submitting false financial reports to the SEC during a one-year period that ended April 1999, according to the suit filed in federal court in Denver.
The SEC's action seeks an injunction against future violations of the reporting and anti-fraud provision of the federal securities law.
The SEC alleges Navig8 2000 was created to analyze computer programs only for the VAX/VMS computer system made by Digital Equipment, which was bought by Compaq Computer in 1998. The company claimed the software addressed Y2K issues for IBM and Microsoft products as well, according to the suit.
The company's lawyers dispute the charges, saying Accelr8 has always properly represented the capabilities of its products and feels its accounting practices are appropriate.
"We have a dispute with the SEC about the proper application of accounting standards," Simon Krauss, Accelr8's corporate counsel, said in a statement. "Our auditors and a former SEC accounting expert hired by us as a consultant have concurred in the reasonableness of our accounting decisions. Unfortunately, the SEC has the power to claim that anyone with whom they disagree has committed fraud, and has done so in this case."
No trial date has been set.
FRANKFURT, Germany--Mannesmann's shares fell as much as 8.5 percent on expectations wireless giant Vodafone AirTouch won't succeed in taking over Germany's top cellular company.
The shares dropped after gaining 43 percent in the past nine days.
Vodafone said yesterday it will make a new bid for Mannesmann and may go directly to shareholders after the German company rejected a $116.3 billion all-shares proposal. Vodafone may not make an offer attractive enough to convince shareholders, who are already doubtful a takeover would bring enough advantages, analysts said.
"Mannesmann's shares are clearly too expensive if Vodafone doesn't make a higher offer," said Frank Rothauge, an analyst at Oppenheim Finanzanalyse, who rates the shares "sell."
Rothauge, pointing out that Vodafone chief executive Chris Gent said he will meet with his company's shareholders over the next two days to work out an offer, said Gent's room to maneuver is limited.
The U.K. company offered $211 per share in the offer that Mannesmann spurned and analysts say Vodafone may have to go as high as $281 per share to succeed. Analysts are also skeptical because Gent said a new bid is unlikely to include cash.
Vodafone, which expects to have an offer ready Friday, may also have difficulty convincing investors of the takeover's advantages. The company's shares rose as much as 2.67 percent today.
"The cost savings the takeover would bring about are very small," Rothauge said. "The only advantage for Vodafone would be to have full control of Omnitel and D2, but the question is whether that justifies a 60 to 70 percent premium on Mannesmann's shares."
Vodafone has minority stakes in Mannesmann's D2 mobile phone business and its Italian mobile phone holding, Omnitel Pronto Italia.
Copyright 1999, Bloomberg L.P. All Rights Reserved. Sprint and Cisco Systems today introduced three Internet access packages for businesses, hoping to provide convenient Internet access to companies of different sizes.
The Sprint and Cisco offer, called Enterprise Internet Access Solutions, brings together Sprint's network technologies and Cisco's networking expertise, giving customers access to scalable services, the companies said.
The three comprehensive Internet access solutions are designed to meet low, medium, and high-end bandwidth needs. The packages include minimal bandwidth access (128Kb connection) services; higher speed access services with T1 connections; and dedicated DS3 connections.
Sprint will provide customers with the necessary CPE (customer premise equipment) to be configured and installed as part of the service. Each customer will receive a Cisco router tailored specifically to their needs and access method, as well as projected future growth of their business networking needs, the companies said.
LOS ANGELES--Oracle chief executive Larry Ellison said the United States should split Microsoft into three companies, after a judge ruled the software giant is a monopoly that used its power to harm consumers.
Microsoft should become three independent software makers that would each sell a version of the Windows software and other applications, Ellison said. Breaking up the Redmond, Wash.-based company would restore competition, he said.
U.S. District Judge Thomas Penfield Jackson this month issued his findings of fact in the antitrust case filed against Microsoft by the Justice Department and 19 states. He said Microsoft's Windows operating system enjoys a monopoly and Microsoft's practices stifled innovation. Without a settlement, Jackson is expected to rule next year on what penalties Microsoft would face.
"They broke the law, and the court has found that they broke the law, consistently," Ellison said at a technology conference in Los Angeles. "I think the government may very well break up Microsoft."
The judge found that Microsoft bullied computer makers such as Compaq and IBM to stop them from selling computers with an Internet browser made by Netscape Communications. Netscape was bought by America Online for $4.3 billion in stock last November.
"The biggest company in the world drove the most innovative company in the industry out of business," Ellison said. "That bothers me."
The Justice Department has said it is considering asking Jackson to break up Microsoft if the judge rules against the company. It didn't say what type of breakup it would favor.
Legal analysts say that Microsoft could be broken up several ways. One would be to separate its operating system business, Windows, from its applications business, which includes its Office line of word processing and spreadsheet software. A third company could be created from Microsoft's Internet businesses.
Ellison said that method would simply create "a new monopoly." Windows should be divided among three companies to create competition in that business, he said.
"It's like a sci-fi movie," Ellison said. "You cut the monster in half and you get two monsters."
Copyright 1999, Bloomberg L.P. All Rights Reserved. Online pharmacy PlanetRx has teamed with IBM to build a remote shopping service.
As first reported by CNET News.com, San Francisco-based PlanetRx said it will make available a free software application that lets users of Palm handheld devices quickly order products from PlanetRx using wireless or standard Internet connections. The software will be available by month's end as a free download from PlanetRx's Web site.
For IBM, the new service provides a showcase for its Web technology. IBM is providing the infrastructure hardware and software for the service, including its RS/6000 and Netfinity servers, DB2 Universal Database software, Websphere application server software and other technology to translate and reformat Web page information to properly display on handheld devices.
PlanetRx is providing the product vision, content, commerce and customer support for the shopping application. By combining PlanetRx's secure online service with IBM's pervasive computing technologies, the two companies are trying to push more Web-based applications to smart devices, many of which are now limited to PC Web access.
Future offerings will provide PlanetRx's full line of products, including prescription medications, and features such as PlanetRx's prescription reminder. Priceline.com, the Web commerce firm that allows users to "name their own price" for cars, airline tickets, hotels and food, said it plans to record a $1.1 billion charge for the fourth quarter as it expands its alliance with several major airlines.
The new partners are UAL's United Airlines, US Airways and AMR's American Airlines. Existing partners include Delta Airlines, Continental Airlines, Northwest Airlines, Trans World Airlines and America West Airlines.
With the addition of these new carriers, Priceline's access to ticket inventory will increase by 94 percent, representing almost 90 percent of the total U.S. market share, the company said.
United officially begins writing tickets today through Priceline while American and US Airways will begin writing tickets within a few weeks.
The Stamford, Conn.-based company said today it has restructured its warrant agreements with the airlines to give all participating domestic carriers equity positions in closer relationship to their market share as it adds the three airlines to its service.
Yesterday, Delta Air Lines agreed to restructure its existing equity position in Priceline to level the playing field. The company sold 2.08 million shares of Priceline common stock to Priceline's founder and vice chairman Jay Walker and chief executive Richard Braddock for about $125 million.
Delta has agreed to exchange 6 million shares of Priceline common stock for 6 million shares of newly issued convertible preferred stock that may be converted into Priceline.com stock on a one-for-one basis. Delta will then hold about 8.5 million shares of Priceline common stock.
Delta will also receive new warrants to acquire 5.5 million shares of Priceline common stock at an exercise price equal to last Friday's closing price of Priceline shares.
As controversy grows over a new patent for a commonly used programming technique to prepare computers for the Year 2000, disputes over this claim and more than 30 similar patents threaten to set off a wave of Y2K litigation, analysts warn.
The U.S. Patent and Trademark Office (PTO) has issued at least 30 patents, seven just this year, for methods, processes and solutions that address fixes for the Year 2000 bug, according to research conducted by Giga Information Group.
Observers worry that a recent decision by one such patent holder to contact major companies about the payment of fees and royalties for infringement of his patent on a Y2K corrective method may entice other patent holders to go out looking for money and, if challenged, prompt a slew of legal battles.
As previously reported, aircraft manufacturer McDonnell Douglas was issued the patent for a software technique called "windowing" used to correct year 2000 glitches in computer software. The company then handed the patent over to the technique's inventor, Bruce Dickens.
Dickens recently announced that he will license the patent for an up-front fee and royalty payments. After the date change, licensing fees will increase substantially for firms unwilling to agree to his initial offer.
"We're concerned that if Dickens' patent is enforced, then some of the other patent holders will think they also can get in on the money," said Kazim Isfahani, an analyst with Giga.
Although many of the earlier patent holders made Y2K tools or started consulting companies based on their patented fix, Isfahani is worried some may be biding their time and could launch a last-minute--and unwelcome--surprise on companies and software makers.
Many of the other existing patents don't encompass a method as popular as the "windowing" technique patented by Dickens, but they do involve ways to renovate code that could be in use by consultants, companies and individuals today.
One patent issued this year and highlighted by Isfahani's report provides a new date code with a two-digit year code that is compatible with standard date codes. It's capable of representing dates well beyond the year 1999. The invention defines a set of extended symbols that may be used as first or second digits in a two-digit year format, according to Patent Office documents.
Another patent was issued this year for a method for modifying and operating a computer system to perform date operations on date fields spanning centuries.
Though other patents have been issued, none of the patent holders have gone as far to get reimbursements for patent infringements as Dickens, according to analysts.
Isfahani thinks some companies will pay off the fees to fend off Dickens, while other companies will not pay the fee because they can't and challenge the patent in court. Others forecast a similar scenario and expect that legal battles may follow.
"I have little doubt that there will be legal battles coming out of this," said Dale Vecchio, an analyst with Gartner Group.
Dickens' windowing patent is one of the most popular of several techniques used to enable software to recognize four-digit year fields. A typical windowing fix would reconfigure software so that years entered as 00-29 are assumed to represent 2000 through 2029, and years entered as 30-99 represent 1930 through 1999.
Windowing is considered a faster way of fixing corrupted code than more traditional methods--such as the expansion method, for example, which allows software to recognize four-digit dates, like the year 2000.
'The attempt to collect fees and royalties from companies that had previously used the now-patented technology could deal a financial blow to thousands of companies, and analysts say that roughly 90 percent of Fortune 500 firms have used some form of windowing to fix their computer systems," the report says.
Vecchio said the fees coupled with court costs could go into the billions. "During my research I found that SAP, PeopleSoft and Microsoft all have used some form of the windowing solution."
Don Jones, Microsoft's Year 2000 product manager, said the software giant's legal and trademark teams are currently looking over Dicken's patent. "Microsoft has been using windowing in some of its products as early the 80s." He would not comment whether the company has received a letter from Dickens.
"Some of our products use it," said John Giordano, CEO of Massachusetts-based Peritus Software Services. "The question is: Who is he going to go after? Right now [Dickens] seems to be interested in big end users."
Giordano said if the patent stands up to initial scrutiny in court, his company will talk to its lawyers and see what step to take next. "Right now everyone is in a wait-and-see mode to see what happens" with Dickens' first attempts at seeking licensing agreements.
Keeping with company policy to not discuss anything related to potential litigation, a spokesperson for IBM would not comment on whether the company received a letter from Dickens, but did say the company uses the "windowing" method in some of its technology.
Legal experts said that the challenge for firms that want to fight Dickens's patent will be proving that the patent should be revoked. Experts point out that any patent is presumed valid once it's issued. The defendant would also have to show that the patent is either invalid or that they didn't infringe upon the patent.
Jeffery Neuberger, a patent attorney with the New York-based firm Brown Raysman, Millstein, Felder and Steiner, said companies will have to prove that windowing is not "novel" or "non-obvious."
Once challenged, the patent will most likely fall to pieces, Tom Oleson, an analyst at International Data Corporation, believes.
"I don't think it will go anywhere," said Oleson. "It's just a person trying to make a killing. Companies will ignore it and he'll be forced to take them to court, where I think it will get thrown out."
Still, the threat of patent enforcement could stir legal action. "If vendors alone used the windowing solution, and I know end users and corporate IT departments did as well, we are talking about fees that will go into the millions and billions of dollars," Vecchio warned.
RealNetworks has lost a high-profile Hollywood deal after becoming embroiled in a bitter dispute with Warner Bros. over Webcast branding, sources say, opening the door to rival Microsoft in the process.
RealNetworks, by far the leader in streaming video and audio on the Web, had been in negotiations with Warner Bros. to Webcast the "Drew Carey Show" simultaneously with an airing of the TV program on ABC. The two companies had also discussed the use of RealNetworks technology and distribution channels for Metallica's "S&M" album.
Warner representatives said those talks collapsed, leading the company to turn to Microsoft's streaming technologies instead. Details of the dispute were not disclosed, but studio executives said they involved brash demands by RealNetworks to promote its brand.
The loss of the deal to archrival Microsoft is a clear blow to RealNetworks, particularly as industry figures show that the software giant may be gaining ground in the digital media market. Moreover, the fallout with a major Hollywood studio could bode ill for future deals in an industry that is infamous for exacting revenge.
"We're totally at war with RealNetworks," one Warner Bros. executive said.
Although the Seattle company's RealPlayer is used in most live Internet music and video broadcasts, Warner Bros. will give its business to Microsoft's Windows Media player, at least in this instance. Warner Bros., a subsidiary of Time Warner, refused to disclose the terms of its deal, saying only that Microsoft--in contrast to RealNetworks--"knows how to value content."
The move indicates that some media executives are growing frustrated with RealNetworks' ability to use its huge installed base of 88 million customers in negotiating online distribution deals. The company has built its Web presence by aggregating content from some of the largest media organizations.
"RealNetworks has traditionally been very clever in how they leverage their technology," said Jim Banister, executive vice president of Warner Bros. Online. "They're a wolf in sheep's clothing."
At issue, Banister said, is RealNetworks' growing prominence as an Internet destination, a development that makes it look uncomfortably like a media company itself--and a potential competitor.
"Most people have dealt with RealNetworks by giving away their content and letting RealNetworks put its brand on top," he said. "We wouldn't have a problem if they were willing to subjugate the brand and make the technology invisible. But that's not what they're doing."
RealNetworks Chief Operating Officer Thomas Frank denied that the company usurps the identity of its content partners.
"Our clients can present their content any way they like," he said, adding that most clients appeared satisfied with their distribution deals. "We've proven that we drive traffic."
Frank further denied that the company uses its viewership to extract unfair licensing arrangements. "We are pioneering new ground," he said. "There isn't a standard agreement because there isn't a standard business model for the Web. We approach each client on a case-by-case basis."
Aram Sinnreich, an analyst at Jupiter Communications, said the company is in a good negotiating position because of the reach of its products.
"The reality is that Real has a lot of leverage," he said. "And the leverage is repaid with access to content."
Most cases are "win-win," Sinnreich added, with content providers getting access to higher Web traffic as part of their deals.
Time Warner's vice president of digital media, Olaf Olafsson, dismissed the "Drew Cary Show" decision as a "tempest in a teapot," saying that the company plans to work with both Microsoft and RealNetworks in the future.
"There are 70,000 employees within Time Warner," he said. "People have opinions. One shouldn't mistake this for a corporate strategy."
Still, media companies may have good reason to keep a close watch on RealNetworks, which is proving itself a formidable competitor in its core software business and beyond. RealNetworks also revamped its Web site earlier this month and released new products such as its Take 5 streaming navigation bar, steps that could help the company expand more aggressively into the media business.
Even as the company's media profile rises, however, RealNetworks insists that its strategy has not changed.
"Our goal has always been to achieve ubiquity in streaming technology and drive the platform forward," Frank said. "This is just an extension of what we've always been doing."
Frank also played down the significance of the "Drew Cary Show" spat.
"We have partnered with more than 100 people in the content space," he said, noting that the company's clients include ABC News, BBC, CBS, FOX, HBO, MTV and Time Warner subsidiary CNN. "Our goal is not to solicit content, but to drive other people's content."
Analysts agreed that RealNetworks has straddled the line between media and technology from the start. But so far, they said, the company appears to have proven it can keep both parts in balance.
"There is a fine line RealNetworks needs to walk between the media companies and its core technology business," said Martin de Bono, an analyst at Gomez Associates. "It's something (RealNetworks chief executive) Rob Glaser is well aware of."
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