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The week in review: Apple gets bitten

Just a week after Intel's stock was pummeled by a profit warning, Apple Computer issued a similar edict, sending its stock into a tailspin and reducing the computer maker's market value by 50 percent.

Just a week after Intel's stock was pummeled by a profit warning, Apple Computer issued a similar edict, sending its stock into a tailspin and reducing the computer maker's market value by 50 percent.

Apple said earnings and revenue for the fourth quarter will fall "substantially below expectations" due to slower sales in September. The company also said in a statement that it plans to lower growth estimates for the coming quarter and full fiscal year.

Apple's announcement came a week after Intel warned of weak demand in Europe, though most big-name PC makers said their business was on track.

These warnings underscore an ugly reality for the technology industry: People aren't buying as many computers as the industry projected. Asia continues to see strong growth, some analysts have said, but Europe has slowed. In addition, corporate spending hasn't rebounded as expected.

Aside from its financial problems, Apple also fended off criticism that its stylish Power Mac G4 Cube is marred by cracks. The company insists the blemishes are not defects, but lines formed through the normal course of manufacturing.

Microsoft wins one
The U.S. Supreme Court handed Microsoft a legal victory as it sent the software giant's antitrust case back to a lower court for review. The Supreme Court was asked to take the case directly under a 1974 revision of the Expediting Act, which allows cases of national significance to bypass the normal appellate process.

The Supreme Court decision scores a point for Microsoft in its long-running antitrust contest against government opponents, even though the game is a long way from being over. Law analysts have described the decision as a victory for the software giant.

Going, going?
3Com chief executive Eric Benhamou resigned after 10 years at the helm of the network equipment giant. He will remain as chairman. Current president and chief operating officer Bruce Claflin will take over as chief executive on the first of the year.

Compaq Computer named CEO Michael Capellas chairman, as Ben Rosen retires after serving on the board for 18 years. Rosen, 67, has been a force to be reckoned with at Compaq. The longtime chairman was behind the ousting of founder Rod Canion in the early 1990s and former CEO Eckhard Pfeiffer in April 1999. He is a founding member of Compaq's board.

Billionaire investor Paul Allen is stepping down from Microsoft's board, ending a formal relationship with the software maker he co-founded 25 years ago. Allen has been the biggest individual seller of Microsoft shares this year, as he sold shares worth more than $6 billion.

Advanced Micro Devices said it named former Motorola executive Robert Rivet as chief financial officer. Motorola immediately sued AMD president Hector Ruiz for luring Rivet away. Rivet had reported to Ruiz, who left Motorola in January for AMD, Intel's main rival in the market for PC processors.

Webvan founder Louis Borders stepped down as chairman of the online grocer but will remain on the board of directors. The changes come about three weeks after the company completed its acquisition of HomeGrocer and laid off 50 workers.

?Gone
Online health site WebMD said its board has approved a companywide restructuring that will result in the elimination of roughly 1,100 jobs. The move is occurring largely because of the overlap created from the combination of several companies acquired by WebMD.

Garden.com, the online seller of everything from plants to hoses, will cut its staff by about 40 percent and hire an investment bank to assist in ongoing fundraising efforts. The company is laying off 93 employees to lower the company's operating expenses.

Viacom's MTVi will lay off 105 employees, nearly 25 percent of its staff, as part of a reorganization. MTVi, the Internet arm of MTV Networks, will cut editorial, technology and marketing staff.

Listen to what the man says
Several U.S. congressmen have introduced legislation that would legalize services for which MP3.com faces potentially hundreds of millions of dollars in copyright damages. Dubbed the "Music Owners' Listening Rights Act of 2000," the bill would give companies the right to copy CDs, store them online, and stream the songs individually to listeners who could prove they already own a copy of the CD.

MP3.com launched a political campaign--dubbed the "Million Email March"--to support the bill.

Napster may or may not be good for CD sales, but online music sites can thank the popular file-swapping service for a substantial surge in revenues last month. Advertising spending at online music sites jumped dramatically in the week after a federal judge clamped down on the music company. Before the ruling, advertisers spent about $2 million on music and streaming sites. In the week after, that figure jumped to about $5 million.

In other music news, Napster returns to federal court on Monday, as the company's attorneys argue before a panel of three appellate judges who have the power to turn the popular service off in the space of a few days. The judges will be deciding whether to uphold a lower court's order to temporarily forbid Napster from assisting in most copyrighted file trading.

Many attorneys believe that the three judges will take this opportunity to make a definitive ruling on at least a few of the legal questions that cloud the future of online music.

New partners
There were plenty of high-powered deals this week, as Exodus Communications said it will acquire rival GlobalCenter for $6.5 billion in stock, creating a Web hosting powerhouse.

Motorola and Palm will develop a so-called smart phone, with integrated personal digital assistant (PDA) software, wireless Internet access, and technology to synchronize data with a PC. The co-branded phone will be released sometime in 2002 and sold through Motorola.

NTT DoCoMo, Japan's largest mobile phone operator by subscribers, and America Online, the giant Internet access provider, will jointly develop a range of Internet services. The deal is the most ambitious of AOL's various forays into the wireless world. It also serves to give NTT a strong ally in the United States, a market it has long had its eyes on.

Also of note
Microsoft said it plans to revise a notification message accompanying a test version of its new MSN Explorer software, bowing to criticism that the feature resembles spam?Sony slashed initial U.S. shipments of its highly anticipated PlayStation2 game console by half because of component shortages, in a move that may make the device a rare commodity during the holidays?E*Trade acknowledged that its Web site is vulnerable to a common attack that could potentially allow a hacker to hijack a customer's browser and gain access to sensitive information?Sun Microsystems CEO Scott McNealy autographed five of his company's new Sun Blade workstations and put them up for auction on eBay? Publishing and graphic-design software maker Adobe Systems will expand its headquarters and will hire about 1,000 people next year to meet rising demand.