Mountain View, Calif.-based Rambus alleged in its request to the U.S. International Trade Commission that microprocessors used in Sega's Dreamcast and made by Hitachi violate its patents. The complaint also seeks an injunction against further distribution of some memory and microprocessor products made by Hitachi that Rambus says breach its patents.
Today's petition relates to legal actions filed by Rambus against Hitachi in U.S. District Court earlier this year. Not to be outdone, Hitachi answered the complaint today and filed counterclaims against Rambus, News.com has learned.
"We'll discuss (the matter) with Hitachi," said Munehiro Umemura, a Sega spokesman.
Rambus in January filed a patent infringement suit against Hitachi at a U.S. District Court based on four patents covering dynamic random access memory products and microprocessors that directly interface with them. The company filed a second patent infringement suit in February, bringing the number of its patents involved in the ITC and Federal District Court proceedings to eight.
The suits say Tokyo-based Hitachi, Japan's third-largest chipmaker, has hurt Rambus financially by making, importing and selling chips that incorporate its patented inventions. Chip designer Rambus gets fees from memory chipmakers when they sell products that use its technology.
Intel, the world's largest chipmaker, is backing Rambus technology in its race against Advanced Micro Devices to sell faster chips. Rambus shares have more than quadrupled in the past month, as investors bet that the newest chips from Intel will use Rambus features and personal computer makers will unveil models with the speedy chips.
Hitachi declined to comment on Rambus' complaint to the ITC, saying it had not been contacted by the U.S. trade watchdog.
News.com's Michael Kanellos contributed to this report.
Copyright 1999, Bloomberg L.P. All Rights Reserved.
Internet giants that earned their reputations--and fortunes--building consumer brands are expanding into the booming market for business e-commerce.
But whether Yahoo, AOL and eBay are in the business e-commerce market for the long haul, or the short profit, remains to be seen, analysts say.
This week, Yahoo said it created an e-business portal aimed at small businesses, providing links to marketplaces that connect buyers and sellers for commercial supplies and industrial goods. Meanwhile, AOL said it is partnering with business-to-business specialist PurchasePro.com to help small businesses build marketplaces or join existing ones.
Add those to eBay's move last week; the online auctioneer said it, too, would target the business market with a service called eBay Business Exchange. And less than a month ago, Priceline.com said it would offer business services.
What's not clear is whether these companies--better known for online chat, dial-up services and auctioning collectibles--will seriously compete in the business e-commerce world against established players and the multitude of new marketplaces being launched daily.
Whether recently announced plans amount to marketing fluff or a strategic shift, one thing is certain, analysts say: The business-to-business market may never be the same.
"Now that you have consumer companies jumping into this space, it is the pinnacle, the peak of the B2B hype," said Alan Mak, an analyst at Argus Research. "With these big firms buying into it, it could even help squash (the smaller players) in the sector."
Firms selling specialized software and offering online exchanges promise to drastically decrease the cost of doing business.
The allure of the business-to-business e-commerce market for online merchants and technology providers comes down to this: Research firms predict the market for global business e-commerce is worth between $2.7 trillion to $7.3 trillion by 2004.
Commerce One, Ariba and i2 Technologies, which supply e-commerce software, have seen their market valuations soar as large and small companies have begun flocking to the Web to set up industrial marketplaces.
Now, as Wall Street begins to cool toward consumer e-commerce businesses, big players such eBay and Priceline are eyeing business-oriented services.
"It does look very much like a 'me too' play because everyone seems to be setting up B2B exchanges these days," Mak said. "I really don't know how successful they'll actually be."
Some investors, however, are waiting to see if business e-commerce gains any momentum for consumer-oriented Net firms.
"I am wary of how big of an impact it will have on these companies," said Darren Chervitz, a senior analyst at the Jacob Internet Fund. "I definitely won't be incorporating any of those added businesses into the (companies' performance) models."
Susan White, an analyst at JP Morgan Securities, wrote in a recent report that Yahoo is "smartly focusing on small to medium-size businesses. This is a fragmented group of buyers and sellers and represents a rapidly growing market. Existing B2B marketplaces have been focused on the exchange of goods between large businesses."
AOL is steering clear of Ariba, Commerce One and i2 Technologies, which are focused on winning the large fortune 500 enterprises, analysts noted.
"What AOL is trying to do is to leverage some existing assets, which are its business customers," said Youssef Squali, an analyst at ING Barrings. "I would be very surprised to see AOL going after medium to large companies."
AOL and Yahoo face another growing obstacle: They are entering an industry that is increasingly fragmented with copycat marketplaces sprouting almost daily. The proliferation of nearly identical exchanges promises to hinder efforts to build the needed momentum to draw enough buyers and sellers.
Take the example of the food and beverage industry. Less than a week ago, Ariba said it was helping food and agricultural conglomerate Cargill to build Novopoint.com, which will link food and beverage manufacturers to their suppliers and partners over the Internet. Earlier this week, Ariba said it was helping Inc2inc.com create an identical exchange.
With its alliance with PurchasePro, AOL will have a hand in creating a growing number of identical marketplaces, which will fragment the industry even further, some analysts say.
"It doesn't really make sense because as buyers you want to go where there is the biggest catalog, and as a seller you want to go where there are the largest number of customers," Mak said. "If there are so many fragmented marketplaces, you won't be able to get the critical mass needed for them to succeed."
The rapid rise and popularity of the business-to-business sector has also obscured the fact that the industry faces serious hurdles. Some have voiced concerns about the potential need for government regulation over new marketplaces that concentrate tremendous purchasing clout among a handful of large companies, opening up the possibility of collusion. Others have noted that despite the tremendous attention the sector is receiving from investors, there are several pitfalls that need to be surmounted, including security and standards issues.
Initial public offerings from Internet companies are expected to take center stage next week, but rising above the crowd could be difficult.
ArrowPoint Communications, ValueClick and Websense Enterprise are among the companies expected to have the best shot at capturing large first-day gains, industry analysts said. Yet they won't be the only firms looking for favor, as 18 IPOs are scheduled to hit Wall Street.
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The market welcomed Caldera Systems and Blaze Software this week, as shares more than doubled for both firms on their first day of trading. A seller of the open-source Linux operating system, Caldera didn't jump as high as its fellow Linux brethren on its first day, but the company still has a market capitalization close to $1 billion.
In comparison, shares of low-cost computer maker Emachines today fell on their first day of trading, dropping under their IPO price of $9 per share.
Next week's offerings may follow in the footsteps of some early technology leaders. ValueClick, an Internet advertising network that landed an $85 million investment from DoubleClick earlier this year, is expected to ride a wave similar to that of the Internet advertising firm.
"DoubleClick priced its IPO in February 1998 at $17 and gained 76 percent on its first day. Now the stock's up 2,394 percent," said Richard Peterson, IPO analyst with Thomson Financial/Securities Data.
Peterson said that DoubleClick's early success could be a good indication that ValueClick, a company in the same market, may do well as a publicly traded firm. Goldman Sachs, the lead underwriter for DoubleClick's IPO, will also shepherd ValueClick's offering, he added.
Last year, ValueClick generated pro forma revenues of $21 million and posted a loss of $2.3 million. The company targets small to midsize businesses with its advertising services, which use a cost-per-click model.
Jeff Hirschkorn, a senior analyst with IPO.com, said he expects ValueClick to raise its price range as high as $15 to $17 per share, as he believes demand will be strong. The company had already increased its range from between $9 and $11 to between $11 and $13.
ValueClick hopes to sell 4 million shares to raise up to $52 million, based on the high end of its pricing range. The company is scheduled to price Thursday and begin trading Friday under the ticker "VCLK."
Demand to ease congestion over the sprawling networks that form the Internet could help fuel demand for ArrowPoint's IPO. Another Goldman Sachs deal, ArrowPoint provides Web switching technology that allows companies to prioritize routing for site search requests, making transactions faster.
"We absolutely love the concept, and it's one that the hot IPO market is in search of," said David Menlow, president of IPO Financial Network. "I would expect a price revision on the upside for this company."
Yet Hirschkorn said that many companies in the hot networking market could pose a threat to the company, namely leader Cisco Systems and rival Foundry Networks--both of which also offer technology to help ease network congestion.
The company posted revenues of $12.4 million for the year ended Dec. 31, up from $201,000 the previous year. Its loss widened to $12.6 million last year from $9.4 million a year earlier.
ArrowPoint plans to sell 5 million shares to raise $85 million, based on the high end of its $15 to $17 range. The company expects to price its shares Thursday and begin trading Friday under the ticker "ARPT."
Websense, which provides Web filtering and traffic management software, raised its price range yesterday to between $14 and $16 a share from between $12 and $14.
The company plans to sell 4 million shares to raise $64 million, based on the high end of its range. Chase H&Q is the lead underwriter.
"Websense has a lot of blue chip clients," Thomson Financial's Peterson said. "I wouldn't be surprised to see this (company) price its IPO at $20 or more."
American Express, BellSouth and Coca-Cola are among Websense's customers.
The company generated $8.6 million in revenues last year for the period ending Dec. 31, up from $6.9 million a year earlier. Its loss rose to $9 million for the year from $5.6 million the previous year.
Websense will trade on the Nasdaq Stock Market under the ticker "WBSN."
High technology makes for strange bedfellows.
News washed over Wall Street yesterday that Rupert Murdoch's News Corp. and AT&T's Liberty Media may want to buy General Motors, the largest auto manufacturer in the world. But it's not the cars the media companies want--GM also owns Hughes Electronics, the parent of satellite TV leader DirecTV and the DirecPC high-speed Internet service.
Investors have long been pushing the auto company to sell or spin off its high-tech division into an independent company. But the giant has consistently balked, saying that it sees "synergies" between the auto business and the telecommunications division.
That's infuriated stockholders, who see Hughes as a gold mine being held back by its association with the auto company.
"Investors are anxious for GM to recognize the value of that asset. There has been pressure applied," said Travis Pascavis, an analyst for Morningstar, a mutual fund information service. "But GM has not been willing to give up control."
The interest swirling around GM's satellite division is just one part of the rash of consolidation and investment now sweeping through the high-speed Internet industry. Telephone and cable companies have spent billions buying each other over the last two years. America Online took a $1.5 billion stake in Hughes last year, aiming at creating a tight relationship between the satellite company and its own Internet services.
Hughes' DirecTV service is the No. 1 direct broadcast satellite (DBS) television service with more than 8.2 million subscribers, outpacing rival Echostar's Dish Network. The satellite TV industry in general has furiously added subscribers in recent years, cutting into cable operators' market share by offering competitive prices, strong customer service and in many cases more channels, digital music and easy-to-use electronic program guides.
GM still owns close to 100 percent of Hughes. It has allowed the division a bit of market freedom by creating a separate tracking stock for the satellite division. But that's not enough for investors. Hughes is a separate company, they say, and it should be let go.
"Hughes operates pretty free of GM," said Saul Rubin, a financial analyst with Warburg Dillon Read. "That's one of the reasons that investors want it to be (literally) free of GM."
Analysts say the automaker has held on to the satellite division partly in order to help add high-tech services such as Internet access and other computerized functions to its cars. Some say the company also has hoped to prop up its own stock price by having a technology component to its business.
That reluctance to let go has spawned months of rumors that somebody might be interested in buying GM outright, simply to get to the attractive Hughes assets. Nobody has made any tangible bids, however.
Yesterday a report broke on financial news station CNBC that Murdoch's News Corp. and possibly AT&T's Liberty Media were talking with bankers, looking for a way to buy GM, keep Hughes, and sell off the auto assets. Reports said that a deal was complicated and unlikely. But Hughes' tracking stock went up 13 percent anyway, and the GM umbrella stock went up more than 6 percent.
News Corp. and AT&T would be interested in using the valuable Hughes satellite assets as a way to offer television and high-speed Internet services, the reports said.
The companies acted quickly to quash the story.
"Today's report that News Corporation has engaged in talks with General Motors, investment bankers and other third parties regarding a potential acquisition of General Motors is entirely false and without merit," Murdoch's company said in a statement.
General Motors denied comment.
But analysts said such a deal, while it would be difficult to complete, fit with the general perception that Hughes had to be separated from the auto business, and that there are suitors in the market that might pursue an expensive surgical operation to do so.
"It's unlikely, but it's plausible," Rubin said. "There's a compelling logic to this happening."
While no official bid has been offered for GM--viewed until recently as immune to takeover because of its high value--and no organized stockholder campaign has tried to pry loose the Hughes assets, analysts say the market has mounted its own kind of punishment.
Analysts note that GM's total stock is worth about $54 billion. The tracking stock that covers the Hughes portion of the company is valued at $19 billion. The company has about $13 billion in cash and securities. That leaves just $12 billion in valuation for the auto manufacturing portion of the business, almost an insulting figure for a company with one of the highest revenue streams in the world.
Nevertheless, most analysts say any immediate deal is highly unlikely, and point to recent GM moves to put more Hughes stock on the market as evidence that it might be considering spinning off the satellite company at last.
Also, any deal with a media company would be complicated by the strong relationship AOL and Hughes have built over the last year, following the ISP's $1.5 billion investment in Hughes. That relationship, cemented last June, is still in its early stages, according to DirecTV spokeswoman Gina Magee.
Magee said the two companies are working on a combined set-top box, which will allow consumers to receive the satellite television signals and AOL's interactive services through the same system. They also are working on a joint marketing campaign for the new service, which will draw much of the $900 million of the AOL investment targeted for the DirecTV division. The rest of the investment is slated to go to the other divisions, including the branch of Hughes that handles the DirecPC high-speed satellite Internet division.
But if a company such as News Corp. were able to mount a strong takeover challenge to the auto giant, GM might finally back away from its reluctance to sell its satellite division, analysts said.
"If you can mount a credible takeover challenge to GM as a whole company, I think they'd sell off Hughes," said Steve Blum, a satellite industry analyst and president of Tellus Ventures, a satellite consulting firm.
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