Like Gateway and IBM before it, the leading U.S. PC maker revealed the last quarter of 1999 wasn't as good as expected. Meanwhile, Compaq reported lackluster earnings, further fueling suspicions of a possible slowdown in the PC industry.
Slowdown
Dell said two events conspired against the company, costing it $800 million in lost sales. The
Round Rock, Texas, firm could not deliver on consumer demand
during the peak holiday season because of processor and memory
shortages, and corporate customers unexpectedly continued to delay
purchases because of Y2K concerns.
Though shortages from Intel were also cited by Gateway and memory chip problems have beset the industry at large, Dell's explanation didn't satisfy everyone. "The component shortage is overblown. Dell is a pure-play leading indicator of the commercial PC market," one financial analyst said.
Earlier in the week, Compaq said it will get off to a slow start in 2000, partly because customers may delay purchases until after the February debut of Windows 2000. Leading manufacturers quietly began shipping systems loaded with Windows 2000 earlier this week, however.
Ironically, retail sales of desktop PCs shot up 37 percent in 1999, according to a new study, driven by ISP rebates and bargain-basement prices. But the gains came at a cost, as revenue grew less than one-fourth as fast.
Total PC shipments for 1999 grew by 23 percent. For the first time, Dell moved past Compaq to become the U.S. market share leader; the latter retained its top spot globally. Compaq and IBM saw their global and U.S. market shares shrink, while Dell, Hewlett-Packard, Apple Computer and Gateway climbed.
Retrench
Dot-com bellwether Amazon.com laid off 150 workers, or 2
percent of its workforce, just days before its quarterly earnings
report. The cutbacks came as a surprise, and Amazon's stock fell
sharply.
Just one year after its launch, Disney decided to revise its Web strategy, narrowing Go.com's focus to play to the company's strengths in entertainment. The move is intended to improve the market position of Go.com, which has struggled to make inroads against portal leaders America Online and Yahoo. Currently, it ranks sixth among the top portal sites, with 22 million monthly visitors.
Separately, a federal appeals court ordered Disney to immediately remove its Go.com logo from TV ads and Web sites until a trademark infringement trial brought by Internet search service GoTo.com is resolved. The U.S. Ninth Circuit Court of Appeals order reinstates an earlier temporary injunction that Disney had sought to overturn.
About a month after buying a direct marketing company, DoubleClick was hit by a lawsuit accusing the Web advertising firm of unlawfully obtaining and selling consumers' private information. Earlier this week, DoubleClick confirmed it is forming alliances with Web sites across the Net to create a network that correlates surfers' personal data and shopping habits. The company plans to build a database that includes consumers' names and addresses, as well as retail, catalog and online purchase histories and demographic data.
New outlook
Time Warner and Britain's EMI Group agreed to combine their music
empires to create a $20 billion company. The pact, which comes on the
heels of the proposed megamerger between online giant America Online
and Time Warner, is likely to establish a Net music giant as the
business of offering downloadable music blossoms.
Struggling computer retailer CompUSA received a new lease on life, as Mexican conglomerate Grupo Sanborns said it would buy the chain for approximately $798 million. Grupo Sanborns already has a 14.8 percent interest it acquired last year. Chief investor in the deal Carlos Helu is one of Latin America's more influential business figures, with ties to Bill Gates, among others.
AT&T launched a new campaign aimed at becoming the network infrastructure of choice for the nascent "rent-an-application" industry. Ma Bell is aiming to partner with smaller application service providers (ASPs) in hopes of capturing the lion's share of their network traffic and boosting use of its own network services. AT&T said it would spend $250 million on infrastructure supporting the new companies.
Ariba and Commerce One are in an all-out battle for prime territory in the business-to-business e-commerce market, trying to become the software platform of choice among a massive group of buyers and sellers. The two companies provide complex procurement software that enables companies to automate the buying and selling of goods and services on the Internet. Ariba and Commerce One are also building huge online exchanges where companies can do everything from selling crude oil to buying materials required to make clothing.
Moving ahead?
Sun Microsystems moved its Solaris operating system two steps in the direction of Linux,
cutting its effective price to $75 and making it easier to scrutinize
the software's blueprints. Designed to increase Solaris' appeal, both
initiatives are intended to prevent Linux and Microsoft from making
inroads into Sun's strong position in the Internet market.
Java inventor Sun, with its protracted lawsuit against Microsoft, has yet to force the software giant out of that market, but the battle may be eroding Microsoft's ability to compete. Features of the latter's popular Java development tool have been frozen in time and slowly fallen behind rival products, analysts say. Microsoft licensed Java in 1995 and the suit was filed in 1997.
Napster, which lets users see which digital music files other users possess, also exposes the latter's Internet Protocol addresses, according to a security expert. IP addresses, unique strings of numbers that identify users' computers on the Internet, could help copyright owners try to prosecute Napster users who may be illegally swapping music.
Also of note
Webvan signed agreements
with Kellogg, Nestle USA, Pillsbury and Quaker Oats and plans to
operate in 15 U.S. markets by the end of next year, more than the 11
it originally projected ... Struggling community site TheGlobe.com
said that its youthful cofounders plan to resign as chief executives
... Tax issues have put construction of an Intel chip factory in Fort
Worth, Texas, on hold ...
The ill-fated Global One joint venture between Sprint, Deutsche
Telekom and France Telecom finally collapsed, as France's
telephone company bought out its two giant partners ... A California
court temporarily barred numerous individuals and Web sites from
posting online a program, DeCSS, that disables the
security on DVD movies ... Earlier, Norwegian police questioned and
charged the 16-year-old
student who helped create the program.
Internet-based television company iCraveTV.com lost a key legal battle
today, as a U.S. judge ordered the company to pull its TV services offline.
The Canadian Web start-up is the target of a full-bore legal attack by American broadcasters and sports leagues, who call it "one of the largest and most brazen thefts of intellectual property ever committed in the United States."
Launched late last year, iCraveTV streams the programming of 17 Canadian and U.S. broadcast TV stations online, uncut and uninterrupted. But it didn't receive permission, angering programmers on both sides of the border.
"We're pleased with the court's decision," said Brian McCarthy, a spokesman for the National Football League, which has succeeded in stopping the company from broadcasting the Super Bowl championship game Sunday.
The legal fight is one of the first signs of what is likely to be an ongoing struggle between traditional programmers and online companies as the Web increasingly becomes a video medium. Many sites have already begun offering original programming of their own--but the attraction of providing proven draws such as sports games, news or network television shows is irresistible.
In the United States, a coalition of broadcasters, cable and movie companies has already asked Congress to block Web firms from gaining rights to their content. Net firms succeeded in blocking that early move, but say the issue will come up in Washington, D.C., again soon.
But iCraveTV has now forced broadcasters' hands, even complicating the issue by applying conflicting national laws to a Net company that operates across borders.
The Canadian company argues that Canada's laws give it the right to retransmit broadcast television signals, in the same way that cable companies and satellite companies do. As long as the company doesn't cut or insert its own commercials into the programming, and ultimately pays copyright holders for their work, iCraveTV's action is completely legal, chief executive Bill Craig says.
But television stations and the studios creating the TV shows say iCraveTV is violating American law. They asked a judge in Pittsburgh, Pa., to pull the company off the digital airwaves.
"(IcraveTV is) seizing billions of dollars of copyrighted television programs and motion pictures and publicly performing them via the Internet to large numbers of persons throughout the United States--without the slightest authorization from any copyright owner," broadcasters said in their lawsuit. That suit includes seven of the major movie studios and three of the four big television Networks.
A U.S. judge granted the plaintiffs' request for a temporary restraining order, effective immediately, which temporarily blocks iCraveTV from transmitting the copyrighted programming into the United States "via the iCraveTV.com site or any other Internet sites or any online facility of any kind."
The judge also ordered iCraveTV to make copies of its Internet server log files available to the plaintiffs by Wednesday and to submit a report to the court indicating their compliance with the order.
Representatives for iCraveTV could not immediately be reached for comment.
The National Football League, which along with the National Basketball association is asking for more than $5 million in damages, was particularly focused on shutting down iCraveTV this weekend, when the Super Bowl championship game will be broadcast.
A full court hearing is expected at a later, undetermined date.
News.com's Corey Grice contributed to this report.
Excite@Home is expected to announce Monday plans to offer its subscribers new security software from McAfee.com that protects them from malicious hackers, sources said.
The alliance is an attempt by Excite@Home, the nation's largest high-speed Internet access provider, to protect its cable modem subscribers from hackers who could try to penetrate a home PC network, delete information on computer hard drives, distribute viruses and even steal sensitive data such as credit card numbers.
Analysts are concerned that consumers with high-speed, or broadband, Internet access connections may face a security risk because their Internet connections are always on, meaning they don't have to log in each time they want to access the Net. Cable modems and digital subscriber lines (DSL) are the two leading methods of broadband connections.
Because broadband users' PCs have constant connections to the Web, analysts fear cable and DSL lines will become an attractive target for hackers.
According to sources, Excite@Home users will soon be able to download McAfee.com's new personal "firewall" software, which is software that protects sensitive data stored in PCs from being accessed by unauthorized people. McAfee's software will scan the data going in and out of the network and protect home PCs from hackers.
Theoretically, the new firewall can stop the email spamming that nearly caused Excite@Home subscribers to lose access to Usenet, a computer bulletin board system containing topic-specific messages. Last week, Usenet administrators nearly banned Excite@Home from the bulletin board after accusing its users of sending too much spam. The Internet access provider averted the ban after finding out that spammers surreptitiously used Excite@Home's network to send their email.
Representatives from Excite@Home and McAfee.com declined comment.
McAfee.com, a subsidiary of Network Associates, makes antivirus and security software. The software is available as a download from the Web.
Symantec, a McAfee.com rival, recently released similar firewall software called Norton Internet Security 2000.
Giga Information Group analyst Rob Enderle said it's critical for subscribers of cable and DSL services to protect themselves with personal firewall software.
"Otherwise, you're just playing Russian roulette," he said. "Someone can get access to your computer because they think it's funny. And if you have personal finance information on your hard drive, you don't know what they'll do."
The problem comes from a type of Internet marker called an "IP address." When a user logs on to the Net, they are assigned an "address." That marker helps information-such as email--get to its proper destination. But that same address can pinpoint the location of a user and possibly help a hacker gain unauthorized access to that user's network.
Many cable and DSL service providers are beginning to offer users randomly assigned Net addresses, or addresses that change constantly so as to make them harder to track. But those numbers are only randomly assigned each time a user turns off their computer, analysts say.
As a result, although Excite@Home offers randomly generated addresses, subscribers still may be susceptible to hackers, analysts say. People with dial-up Internet access face less of a security risk because they generally stay logged online for less than a few hours at a time.
Investment banks are rushing to get several initial public offerings launched early next week, as fears grow that the Federal Reserve could hike interest rates higher than expected when it meets mid-week.
Initial public offerings expected to grab investors' attention next week include DSL equipment maker Turnstone Systems, fiber-optics company IMPSAT Fiber Networks and business-to-business cattle site eMerge Interactive.
A sense of urgency in getting deals done was heightened after government reports released today showed fourth-quarter inflation grew faster than anticipated. That sent the markets plunging as investors feared the Federal Reserve will ratchet up short-term rates beyond the 0.25 percent that had been anticipated.
As a result, the Dow Jones industrial average shed 289.15, or 2.6 percent, to 10,738.87; the Nasdaq fell 152.83, or 3.8 percent, to 3,886.73; and the Standard & Poor's 500 Index lost 38.36, or 2.7 percent, to 1,360.20. The CNET technology index fell 78.80, or nearly 3 percent, to 2,785.11.
For the week, the Nasdaq sank 8.2 percent, the biggest weekly decline since August 1998.
The economic reports may give Federal Reserve chairman Alan Greenspan enough ammunition to raise rates 0.50 percent, said Jeff Hirschkorn, senior analyst with IPO.com.
"That may crimp the deals for smaller underwriters, but the larger bankers like Morgan Stanley will weather it," he noted.
Despite the turmoil in the markets, Turnstone is off to a strong start. The company recently bumped its pricing range up by a sizable 53 percent to $23 to $25 a share from $15 to $17. The DSL company hopes to raise up to $75 million, based on the high-end of its range and 3 million shares it will sell.
The company could follow the performance of Copper Mountain Networks, which made its debut last May. Copper Mountain priced at $21 and gained 226 percent its first day of trading, Hirschkorn said. The stock currently trades at about $56 a share.
Turnstone generated revenues of $12.5 million in the quarter ended Dec. 30, up from $9 million in the previous quarter. Profits reached $1 million in the fourth quarter.
The company began shipping its Copper CrossConnect CX100 in the first quarter last year and currently relies on a limited number of customers for its revenues.
Turnstone expects to price Monday and begin trading Tuesday under the ticker "TSTN." Goldman Sachs is the lead underwriter.
IMPSAT and eMerge also operate in hot sectors, Hirschkorn said.
IMPSAT is expected to sell 11.5 million shares at $13 to $15. Based on the high-end of the range, the company could raise as much as $172.5 million.
The company, which has more than 1,500 clients in the growing Latin America region, generated $167.2 million in revenues during the nine-months ended Sept. 30, compared with $149.9 million a year ago. Meanwhile, its loss widened to $101 million during the period from a loss of $23.3 million the prior year.
The company expects to price Monday and begin trading on Tuesday under the ticker "IMPT." Morgan Stanley is the lead underwriter.
eMerge Interactive operated a business-to-business site where cattle are sold and industry news is posted. The lead underwriter, Adams Harkness, is not a household name on Wall Street, but it specializes in commodities IPOs, Hirschkorn said.
eMerge could raise up to $96 million, based on the high-end of its $10 to $12 range and 8 million shares it will sell. eMerge plans to price on Tuesday and begin public trading Wednesday under the ticker "EMRG."
eMerge generated $18.3 million during the nine months ended Sept. 30, up from $1.1 million a year ago. The loss from continuing operations rose to $10.7 million in the period from $3.9 million a year earlier.
Palm plans to play a big hand in its IPO.
The device maker is looking to raise upwards of $368 million in its initial public offering, based on the high-end of its $14 to $16 price range and 23 million shares it plans to float out, according to its filing today with the Securities and Exchange Commission.
One highlight from the filing: When Palm spins off from 3Com, it will hold an initial market value nearly two-thirds the size of the networking company.
The staggering numbers reflect Palm's growing prominence in the device market, as well as the increasing industry-wide focus on gadgets and devices, while high-end desktop PCs fade from view. Palm has logically embraced the recent trend of looking to single- or limited-use devices to access the Internet and perform many functions that a few years ago could only be performed by expensive, full-featured PCs.
Palm has been on a roll of late, signing up high-profile licensees like Nokia and Sony and topping recent end-of-year market share surveys. But the challenges facing the company are growing in proportion to the larger role it's trying to play in the future of computing, analysts say.
Rather than just a maker of personal information aids, Palm sees itself as the leader of troops of developers and partners working in concert to create an army of users accessing Internet-based services and communicating wirelessly all on devices running on the Palm operating system.
This so-called Palm Economy, as 3Com executives like to call it, is the company's attempt to place itself squarely in the middle of the trend toward an emphasis on limited-use connected devices, Internet appliances and smart cell phones, rather than on full-featured desktop computers.
Based on its 570 million shares outstanding and the high end of its pricing range, Palm will have a market capitalization of $9.1 billion when it goes public. That's good news to 3Com, which will hold a 93.3 percent stake in the spinoff. 3Com has a market cap of approximately $15.9 billion.
Other players that stand to benefit from the IPO are America Online and Nokia, which will both hold a 5.3 million stake, and Motorola, which will own 4.3 million shares. Each of these companies has struck alliances with Palm to create services and devices that run on the company's operating system.
During the six-month period ending Nov. 26, Palm generated $435 million in revenues, compared with $263 million a year ago. And it posted a profit of $22.5 million in the period, up from $16.2 million a year earlier.
The company plans to trade under the ticker "PALM."
The company has recently been working to de-emphasize its hardware business and promote its Internet services and platform licensing groups. But it will likely be slow going. According to recent market share surveys, Palm-branded devices make up around three-quarters of the handheld market, and the company itself said in the filing that the vast majority of its revenues come from its hardware business.
Palm's attempt to exploit the industry trend, although certainly timely, also raises questions about whether the company infrastructure, which has undergone numerous management and organizational changes, or its technology, which some say is ill-equipped to support an entire industry-wide shift, will succeed as an independent entity.
Palm is led by Carl Yankowski, a former Sony and Reebok executive, but before his appointment earlier this year, the company went through at least three chief executives in as many years.
Meanwhile, sources say Palm is set to release its first device with a color display, the Palm IIIc, on Feb. 20. Although the move has been long-anticipated by the handheld community, it is unclear whether the Palm operating system, which has been hyped by the company for its narrow focus, is sufficiently scaleable to handle battery-draining multimedia applications.
Along the same lines, the company's high-profile licensees, which include Nokia, Sony and Handspring, are all expected to enhance Palm's multimedia and wireless Internet capabilities. Nokia's partnership will result in some type of hybrid cell phone with PDA functionality, and Sony is expected to introduce a device or phone with wireless Internet access and a color display. At the same time, Apple and Palm are rumored to be close to announcing a joint product.
Although these devices are sure to give the company visibility and buzz, the Palm operating system may not be able to live up to the hype. The "Zen of Palm," which is what the company calls its design philosophy, emphasizes simplicity and ease of use over fancy features and bells and whistles, which would seem to run smack into the new focus on expandability. This philosophical conflict could result in stunted sales and problems with strategic partnerships, analysts warn.
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