MaxSpeed makes hardware that lets companies plug numerous sets of keyboards, pointing devices and monitors into a single Linux server. The hardware, which is being used at FTD, Little Caesars and others, is geared for use at chain stores that have numerous outlets.
The 65-person company, founded in 1988 and based in Palo Alto, Calif., sells networked cash registers called "point-of-sale" terminals to stores such as Goodyear Tire, CVS Drugstores and Harley-Davidson. The company is moving its product line to Linux-based systems. Within a year, half the company's business will be Linux, predicted chief executive Wei Ching.
"We definitely think Linux is the wave of the future," Ching said. Apparently investors agree: Joe Fogg III, chief executive of Westbury Equity Partners and former head of investment banking at Morgan Stanley, secured $14 million for MaxSpeed in February through Westbury. Fogg is a member of MaxSpeed's board.
Linux, an operating system cloned from Unix, is spreading across all sorts of computer markets. Its Unix roots, which allow many users to tap into a single server, make it a natural pick for MaxSpeed. Corporate and private investors have been flocking to Linux companies, though most don't expect to be profitable for some time and stock for publicly traded Linux companies has been slipping.
In the case of local outlets, Linux often competes with Santa Cruz Operation's UnixWare, a version of Unix that runs on comparatively inexpensive Intel servers. SCO, despite some earlier shunning of Linux, is gradually embracing the operating system.
Despite the buzz around Linux, MaxSpeed won't have an easy time, said International Data Corp. analyst Eileen O'Brian. "There's nothing wrong with it from a technical standpoint," she said. "My concern is the company may not have the wherewithal and momentum to market it."
MaxSpeed is going up against better established companies in the "thin client" market--notably Wyse, which sold more than 60 percent of thin clients in 1999, and IBM. MaxSpeed in 1999 "was not a very active player."
A year ago, MaxSpeed introduced a card in 1999 that lets four people use the same Linux server. The card has four ports for network cables that lead to a box about the size of a credit card an inch thick.
The company also sells a system that lets many of these cards be plugged into a single system. In one FTD shop, 50 terminals connect to one Linux computer, though the typical number is usually between 10 and 20.
In February, MaxSpeed released a $149 card that lets two people use the same Linux system, said chief technology officer Dave McAllister, a former SGI Linux expert. MaxSpeed hopes the device will be popular with home computer users--for example, in multiplayer games.
The more computing-intensive the task, the fewer people can use the computer. For a low-stress task such as a cash register, dozens can use a single server. "But if someone fires up 27 copies of Star Office, it's going to eat your system," McAllister said.
For now, Linux is only modestly used on desktop computers, but MaxSpeed believes today's 4 percent penetration could expand to 30 percent in the next five years, McAllister said.
The two-user MaxSpeed card, called +One, works with Red Hat Linux but requires a special driver from MaxSpeed. Support for other versions, including TurboLinux, Mandrake, Caldera Systems and SuSE, is coming.
Drugstore.com raised $102.6 million in a secondary public offering earlier this week.
The Amazon.com-backed company sold 6 million shares at $18 a piece, raising $108 million before expenses. Separately, the Drugstore.com Foundation, a charitable organization established by the company, sold another 20,000 shares of Drugstore.com stock.
The offering comes as the market for consumer e-commerce stocks has plummeted. E-tail bellwether Amazon's stock, for instance, is down 36 percent from its 52-week high, set in December.
Meanwhile, Drugstore's stock has fallen more precipitously. The company reached its 52-week high of $70 in July on its first day of trading. Last month, when it filed for its secondary offering, the company's stock was at $27.75, or more than 60 percent below its peak.
On Tuesday, the day of the Drugstore.com's secondary public offering, its stock dropped to its 52-week low of $14. Today, the company's stock was up $1.38 to $16.5.
The offering nearly doubled the number of Drugstore.com shares in circulation, bringing the total number to 13.11 million.
Drugstore.com lost $115.8 million on $34.8 million in revenue last year, its first year selling on the Web. The company lost $8 million on no revenue from its inception in April 1998 to December 31, 1998.
Amazon owns 23.8 percent of Drugstore.com, down from a 26.8-percent stake prior to the offering. Brick-and-mortar pharmacy chain Rite Aid owns 17.9 percent of the Bellevue, Wash.-based company, down from 20.3 percent.
Other investors include venture capital firm Kleiner Perkins Caulfield & Byers, which owns 13.5 percent; General Nutrition Companies, which owns 5.7 percent; Paul Allen's Vulcan Ventures, which owns 4.4 percent; and Drugstore.com chief executive Peter Neupert, who owns 3.7 percent.
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Consumer brands Yahoo, AOL and eBay are expanding into online business services. Meanwhile, the business-to-business marketplace boom hits heavy industry, as aerospace, oil and paper companies band together to create online exchanges.
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Net giants target business e-commerce Web behemoths such as Yahoo, AOL and eBay that have earned their names building consumer brands are expanding into online business services.
Aerospace giants team on B2B Net marketplace
Exchange takes oil trading online
Forest, paper products companies plan Net marketplace
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A spokeswoman at Foodline, an online restaurant reservation and dining information site, declined to discuss the financial terms of the deal announced today.
Two weeks ago, America Online agreed to offer OpenTable.com's dining services on AOL's Digital City network, giving OpenTable access, in the nine cities it operates, to AOL's customers.
Days prior to that, McDonald's led a group that included Blockbuster, TV Guide and Kraft Foods, in investing $80 million into reservation site Food.com.
Foodline offers information on restaurants and a reservation service in 11 cities, including Los Angeles, New York and Philadelphia. The New York City-based firm plans to expand to eight more soon.
Foodline has also received investments from Ticketmaster Online-CitySearch and Kestrel Venture Management.
NEW YORK--Shares in Silicon Laboratories more than doubled in its first day of trading, amid optimism the designer of circuits for computer modems and cell phones will benefit from surging use of the Internet and wireless communication.
The shares rose to $69.38 from the IPO price of $31, 50 percent more than the company initially planned and enough to give the firm a market cap of $99 million.
Silicon Laboratories designs miniature, mixed signal devices that allow modems to read both analog and digital signals, enabling connection from computers to phone lines. It's also developing similar products to work in cell phones.
"The betting is that Silicon Labs will be able to duplicate their success in the modem market to the wireless market," said Drew Peck, an analyst at SG Cowen Securities Group.
Right now, the only products Silicon Laboratories sells in commercial quantities are chips for modems. It is looking to expand sales to cell phones, fax machines, set-top boxes, hand-held organizers, and other equipment.
With U.S. sales of wireless services expected to more than double to $100 billion by 2005, Austin, Texas-based Silicon Laboratories will tap a lucrative industry. U.S. wireless customers are expected to surpass 225 million in five years, according to research firm Strategy Analytics.
Silicon Laboratories is already profitable, earning $11 million in 1999, and has customers including PC-Tel and 3Com.
"This firm's fundamentals are stronger than most we've seen over the past two years," said analysts at WorldFinanceNet.com in a report.
Copyright 2000, Bloomberg L.P. All rights reserved. After an exhausting week, the markets slowed today, and tech stocks languished.
The Nasdaq composite index rose 22.42 to 4,963.03 after gaining more than 160 points this week. The Dow Jones industrial average edged down 7.14 to close at 11,112.72, ending a week in which it gained more than 500 points with a whimper.
The Standard & Poor's 500 index rose 11 cents to 1,527.46, and the CNET tech index gained 22.88 to close at 3,540.66, led by shares of E*Trade and Ameritrade Holding.
Winners edged out losers, with 55 of the 100 stocks in the index rising, 42 falling and three remaining unchanged.
Of the 18 sectors tracked, Internet retailers posted the sharpest gains, rising about 7 percent. Semiconductor stocks were the day's largest losers, dropping 1 percent.
Intel closed down $3.56 at $139.06, while Microsoft inched lower by 19 cents to finish at $111.69.
The initial public offering of Silicon Laboratories, an integrated circuit maker, was the largest percentage gainer on the Nasdaq Stock Market, rising $40.25, or 129 percent, to $71.25 on a volume of more than 6.8 million shares.
Among members of the CNET tech index, E*Trade and Ameritrade posted strong gains.
E*Trade rose $4.13, or 14 percent, to $32; Ameritrade gained $2.31, or 10 percent, to $24.25. An analyst at US Bancorp Piper Jaffray raised his earnings estimates on the stocks.
Shares of eBay rose $20.19, or 9 percent, to $243.75 on reports that the company has renewed merger talks with Yahoo, which rose $3 to $194.
Hewlett-Packard fell $4.88 to $142.38. CEO Carly Fiorina said she expects the company to post an increase in sales for the current year.
National Semiconductor fell $2.94 to $65.13. Competitor IBM announced that it will make chips for TV set-top boxes to compete with National Semi's products. IBM rose $6 to $121.25.
The Emachines IPO fizzled on Wall Street. The shares closed at $8.25, down from their offering price of $9.
The Philadelphia semiconductor index rose 2.38 to 1,287.50, led by chip equipment maker Applied Materials, which rose $4.38 to close at $106.81.
Multiple Zones International, a direct marketer of personal computers, was another big percentage gainer on the Nasdaq. The shares jumped $5.44, or 93 percent, to $11.25. Volume topped 28.5 million shares. The company announced that it will become a major supplier to Microsoft.
NEW YORK--Deltathree.com's shares fell 39 percent after the provider of Internet telephone services said chief executive and president Amos Sela is resigning to join RSL Communications.
Deltathree.com's shares fell $11.50 to $18 on the Nasdaq. The shares had almost doubled since they were first sold to the public in November at $15.
RSL, controlled by cosmetics heir Ronald Lauder, owns a 68 percent stake in New York-based Deltathree.com. Sela, 56, will become vice president of special projects at RSL, a voice and data-communications company. Noam Bardin, 28, a co-founder of Deltathree.com, will become president and interim CEO April 1.
"The board has become very comfortable with Bardin driving the strategy over the past several months," said Mark Hirschhorn, Deltathree.com's chief financial officer. "The board thought it'd be better to have him lead."
Deltathree.com's board formed a search committee to oversee the transition and search for a new chief executive, which will take several months, the company said.
At that time, Bardin, who also is chief technology officer, will retain an executive role and possibly become chief operating officer, Hirschhorn said.
Bardin co-founded the company with Elie Wurtman and Jacob Davidson in 1996.
Deltathree.com, which had 1.7 million subscribers at the end of the fourth quarter, generates its revenue by routing calls on its network and from banner advertising. The company offers features such as fax, voice mail and email that can be checked by phone or computer.
The company said it has research and development offices in Jerusalem, where it employs 80 of its 125 workers. Most of the remaining employees are in New York.
Copyright 2000, Bloomberg L.P. All Rights Reserved.
TOKYO--Rambus, a licenser of technology that lets microchips work faster, asked U.S. trade authorities to order a halt to imports of Sega Enterprises' video game console, which it says infringes on its patents.
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 $22 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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