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The week in review: Compaq slipping

Leading rivals gain ground, according to newly released market research reports, dealing the leading PC manufacturer another dose of unwanted news.

Leading rivals gained ground on Compaq in terms of market share, according to newly released reports, dealing the leading PC manufacturer another dose of unwanted news.

Compaq's first-quarter market share slipped to 15.7 percent of the 8 million systems shipped in the United States, a decrease of 2.1 percent compared to first quarter of 1998. Meanwhile, archrival Dell gained 3.2 points, reaching 14.3 percent, and Gateway, Hewlett-Packard, and IBM--this quarter's big winner--also posted gains.

Falling behind
More alarming, in a period of rapid expansion, Compaq's domestic growth rate of 10 percent fell well below the industry average of 24 percent, helping the rest of its competitors make inroads. The Houston company's international growth was also off the pace.

After the reports were released, Michael Heil, general manager of worldwide sales, resigned to become chief executive of a data networking company. Compaq's falloff has already precipitated the April 18 ouster of chief executive Eckhard Pfeiffer. That surprise followed warnings that first-quarter profits would be half of analysts' projections--which Compaq blamed on weakness in the corporate PC market.

Compaq did show improved results in Asia, along with Gateway, Sun Microsystems, and Apple Computer. The important region's uptick stems from a variety of factors, including seasonal strength, economic mending in markets such as Japan, and lower PC prices.

Also this week, Compaq said it will once again allow dealers to sell its Presario consumer computers over the Web, but newly established pricing restrictions won't necessarily ease the tension between Web and retail sales outlets.

Closing
Time Warner confirmed its intention to close down its mammoth, much-criticized Pathfinder Web site, which aims to show all the company's popular magazine titles on one page. The site ran huge losses from its debut in 1994, and sparked early debate over whether publishers should offer their content for free online, as well as how and whether it makes sense to repurpose print material for the Web.

RealNetworks is expected to jump into the world of MP3 and other digital music download formats with a product called Jukebox, according to people familiar with the plan. The "client-side" application converts, or "rips," compact discs and translates them into a digital file format. The streaming leader's move would be another significant boost for the Net music's leading audio format, which the music industry dislikes because content easily can be pirated.

Pioneer newsgroup aggregator Deja News is preparing to announce sweeping changes to its services, including the addition of a user ratings feature, e-commerce offerings, and even a name change. Launched in 1995, the site was overhauled in 1998, reorganizing its content into categories similar to those found on portals.

Portal sites are competing to attract users with calendaring software, forming alliances and making acquisitions to draw return traffic and also develop valuable marketing databases. Recent activity includes Microsoft's acquisition of Jump Networks, America Online's acquisition of When.com, Lycos's launch of a calendar service in conjunction with Amplitude.com, and Excite's calendar launch in conjunction with Starfish.

CheckFree's online bill-paying system has been hit by intermittent interruptions since Monday, affecting users who tried to pay bills via personal finance software such as Intuit's Quicken or Microsoft Money.

Staying put
The price of the Windows desktop operating system has remained constant in recent years, despite plummeting prices in memory, processors, and other components, according to executives testifying in the Microsoft antitrust case. Windows has stayed flat at around $35 or more per PC for Microsoft's biggest customers, and sells for about $50 per copy for smaller PC makers.

Microsoft shipped the last beta of the Windows 2000 operating system to 650,000 testers, drawing closer to the long-delayed upgrade of the former Windows NT.

Intel jumped back into the highly competitive graphics chip market with a series of 3D PC processors, announcing the 810, a chipset with integrated graphics, audio, and other functions that will ship in June, and the i752, a standalone version of the graphics engine that comes with the 810 for standard PCs. Later this year, Intel will release the i754, a higher-performance graphics chip for performance PCs, sources say.

Leading graphics chipmaker ATI said it intends to develop a graphics processor that combines graphics with a key part of the PC chipset, mirroring the strategy of Intel and other manufacturers and suggesting a resurgence of the system-chip market. "This is the graphics guys saying they're getting into [the chipset] space," one industry analyst said.

The debut of AMD's K7, said to outperform the Pentium III in some tests while costing less, may--or may not--mark one of the microprocessor industry's yearly highlights. It could help the Sunnyvale, California, company grow beyond the low-end PC segment, loosening Intel's virtual monopoly in corporate computing while sparking profitability and industry respect. Then again, it could be the latest in a series of AMD processors that are tough to find, difficult to manufacture in quantity, and ultimately relegated to discount pricing.

Changing
Making good on a promise of change, new EDS head Dick Brown said the firm is slashing 5,200 jobs, reducing $1 billion in costs, and starting a new division targeting e-business in hopes of fueling a renaissance at the sluggish services and consulting giant. Details came in the wake of the Plano, Texas-based company's report that profit for the first quarter dipped 14 percent to $181.8 million, or 36 cents a share, down from $211.3 million, or 43 cents, a year earlier. Saying Brown is starting to prove he can wield an ax as well as he used to make acquisitions at Cable & Wireless, analysts gave fairly high marks.

PeopleSoft finally described how it will make it easier for business software users and partners to integrate the company's applications with those from other vendors. But the company's Open Integration Framework won't be available until PeopleSoft 8 is released in the second quarter of next year.

Sun is revising a plan to win recognition for its Java programming language as an international software standard. The possibility of bypassing of an International Standards Organization committee is the latest development in Sun's struggle to balance Java's promotion with the ability to maintain control over the technology. It would set Sun back several steps in the standardization process, though not all the way back to square one.

In a related matter, Sun released its HotSpot Java technology, which speeds the performance of Java, changing its earlier plans and deciding to offer it for free.

Hewlett-Packard and the Sun-Netscape alliance made dueling e-commerce announcements regarding joint partnerships, underscoring the fact that HP's once-strong alliance with Netscape has gone sour as arch-rival Sun begins to play a dominating role. In fact, HP's e-commerce strategy has changed markedly, as the company looks past simple sales to strategies such as hardware giveways, equity stakes, and even acquisitions.

In a risky move for a struggling company, 3Com is charting a course that counts on Palm Computing sales to boost sales of higher-margin products, such as its networking devices for small and medium-sized businesses and remote access hardware.

Growing
Amazon.com agreed to buy Exchange.com, Accept.com, and Alexa Internet, an Internet triple play that will expand both its volume of titles and its range of technology. The moves, worth $645 million, underscored the company's philosophy of continuing to expand services and market share--at the cost of growing losses. The company reported its quarterly loss increased to $61.7 million, or 39 cents a share, from $10.4 million, or 7 cents, in the year-earlier period. Revenue more than tripled, however, to $293.6 million from $87.4 million last year. Wall Street analysts remained patient.

eBay will acquire Butterfield & Butterfield, one of the world's largest and most prestigious auction houses, to help extend its auctions into higher-priced items. The acquisition appears to be the largest, and perhaps the first, purchase of a company based in the physical world by an Internet-only operation. eBay reported profit rose 12-fold, to $7 million from $569,000 a year earlier. The company earned 5 cents a share, better than both expectations of 2 cents a share and last year's earnings of 1 cent per share.

Oxygen Media is preparing to launch its Web site next month, along with a 24-hour sister cable channel in 2000, as industry watchers wait to evaluate the strategy of tapping enthusiasm for PC-TV convergence by targeting an immense and obvious audience: women.

Rumors that AOL is moving to acquire a traditional broadcaster have been swirling for months, and analysts agree that such a move seems inevitable. Speculation resurfaced this week that AOL may invest $250 million in radio broadcaster Chancellor Media, and there has been continued talk of AOL's joining forces with cable operator Comcast to try to outdo AT&T's bid for MediaOne.

For its part, MediaOne, which has takeover offers from both Comcast and AT&T, said it has entered into confidentiality agreements with both AOL and Microsoft Online that may lead to possible merger talks. The No. 3 cable company said the agreements allow the two firms to review the particulars of its merger agreement with cable operator Comcast. Both are anxious not to be left on the broadband sidelines.

MCI WorldCom and Sprint agreed to buy three of the top four national wireless cable TV companies, closing a bidding war for the biggest of the struggling firms. The long distance companies are betting that wireless cable will help them compete with Ma Bell's growing cable broadband networks and the bundled packages of voice, video, and high-speed Net services that AT&T is rolling out through those high-speed pipes.

The role of Kleiner Perkins Caufield & Byers in @Home Network's proposed $6.7 billion acquisition of Excite demonstrates the high-profile venture capital firm's take on the philosophy of keiretsu, the Japanese practice of encouraging corporations to join in interlocking strategic partnerships. Kleiner, which has invested in both companies and placed key personnel on their boards, did well as a result of the deal, according to an SEC document.

Broadcom's purchase of home networking startup Epigram could leave rival communications chipmaker Lucent Technologies out in the cold. Both make communication chips for high-speed networks--via digital subscriber line (DSL) and cable modems--and see Epigram's technology as a way to distribute video and voice throughout the home using broadband connections.

Stymied
The Senate had just agreed on the controversial "Y2K Act" when debate broke out again, with Democrats wishing to tack on additional amendments, stymieing the measure until next week. The disputed bill aims to curb lawsuits against companies arising from the Year 2000 technology problem by allowing defendants the opportunity to correct the situation before facing a lawsuit, setting punitive damage caps for all suits, and providing 90-day grace periods for businesses to fix problems.

Elliot Maxwell, the Clinton administration's new e-commerce czar, said the government will inevitably play a role in Net-based business, but it's up to business itself to determine how big that role will be. "What industry does is the most important determinant of the future," Maxwell said. "They have the opportunity to shape the rules, to shape the environment."

Shortly after being pilloried for gathering personal data from unwitting Windows 98 users, Microsoft seems to have settled on a fairly new member of its executive team as its unofficial privacy emissary. Ex-Firefly Network executive Saul Klein appeared to clinch the role at last month's Computers, Privacy, and Freedom conference in Washington.

Microsoft chief executive Bill Gates directed his staff to explore how a competing operating system might fail when running Microsoft applications, according to evidence released in Caldera's private antitrust lawsuit against the software giant. A raft of depositions from Microsoft's federal antitrust case was also released.

Also of note
IBM notched another supercomputing win at major government research facility, a contract that will also serve as a computing showcase for its Power 3 processor ? Enchilada launched yet another "free PC" plan that allows customers to get the combination platter of Internet access and a PC for a low monthly price ? Gateway, looking to beef up its strategy of bundling Internet services with its PCs, may enlist the help of a start-up called iBelong, which builds "vertical portals" around local news, weather, sports, and other "general interest" content ? A college student found a glitch that enables a malicious Java program to crash Windows 95- or 98-based computers ? Intel's Architecture Labs is developing a reference design for a wireless tablet device that allows users to access local information and Internet content ? Lucent Technologies plans to develop its circuit-based switching technology so it can deliver voice calls using a data--or "packet-based"--scheme without losing features such as call waiting or 911 service ? Echostar Communications and Microsoft's WebTV Networks will launch an interactive television service next month, becoming one of the first high-speed Internet set-top boxes to hit stores, though the $499 system will lack many of the fancy features expected in broadband systems ? Microsoft became an Internet2 business partner and said it will contribute $1 million plus developers to the project, working with researchers at more than 150 universities.