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The week in review: Spotlight on new OSes

Software makers are busy tweaking operating systems, with Apple introducing its first major upgrade to Mac OS X and Microsoft putting the finishing touches on Windows XP.

Software makers are busy tweaking operating systems, with Apple Computer introducing its first major upgrade to Mac OS X and Microsoft putting the finishing touches on Windows XP.

Apple will release on Saturday an operating system update designed to improve performance and add capabilities to the original version of Mac OS X. Mac OS X 10.1 will be available free for OS X owners through Apple's stores and other Mac retailers. The update is free through Oct. 31 at the stores. If ordered from Apple, it costs $19.99. The boxed version, which costs $129, will also be available Saturday.

Meanwhile, Microsoft announced that it will launch Windows XP, its newest operating system, at the Marriott Marquis Theatre in the heart of New York's theater district. Top Microsoft executives, along with key industry figures, will be present at the launch Oct. 25, less than two months after the gruesome terrorist attacks on the city's World Trade Center.

The tech industry will soon find out whether Windows XP will encourage wary consumers to spend their money on new systems for home and office. This week, PC makers including Compaq Computer, Dell Computer and Gateway unveiled new systems pre-loaded with the latest Microsoft operating system. Prices start around $750 for desktop models without monitors and $999 for laptops.

Microsoft has set Nov. 28 as the release date for Windows XP Embedded, the next version of the company's software designed for devices such as slot machines, cash registers and set-top boxes. The company will release the product at its Windows Embedded Developers Conference in Las Vegas.

New territory
Sun Microsystems and several other computing giants joined mainstream businesses such as United Airlines, General Motors and Fidelity Investments to try to outflank Microsoft's Passport service for saving and checking people's online identities.

The group, which goes by the name Liberty Alliance, intends to provide a neutral method for handling those identities. The effort will compete with Microsoft's Passport authentication service.

As giants of technology raise their bets in the battle over Internet identification technology, VeriSign may already hold the winning cards. VeriSign, which supplies a large chunk of the security software used on the Internet, has been quietly building a digital information and infrastructure empire. Its Internet services are rapidly becoming the necessary underpinnings for other companies' lofty ambitions.

In a move that could generate much-needed subscription revenue in the face of an anemic online ad market, Yahoo is testing demand for a new paid service that would feature Web-based word processing and other office applications. The company is hosting a survey on its Web site that asks questions based on a hypothetical "full-featured suite of office productivity tools available online through a browser, handheld devices and Web-enabled cell phones."

"Combined with online file storage, this application allows you to access and edit all your files from anywhere at any time. You would also be able to grant access to your document to others," the survey page reads. The survey provides some hints about what the company is considering, but no information on when, or if, it will be launched.

Handspring is known for making colorful handhelds for consumers, but the company has been quietly gearing up for an attack on the corporate market. Handspring took its first steps earlier this year, partnering with distribution giant Ingram Micro in March to begin signing up resellers that focus on businesses. Handspring went a step further this week by announcing a deal with Aether Systems, whose technology allows mobile devices to access corporate data.

Pay to play
Music-swapping company Napster announced a major deal with music publishers Monday, settling part of its outstanding lawsuit and helping clear the way for its planned subscription service. As part of the deal, Napster agreed to pay $26 million to settle its ongoing legal disputes with music publishers and songwriters. That doesn't mean the lawsuit troubles as a whole will disappear--record labels are continuing with their own litigation, which still threatens Napster with even more substantial legal damages.

Bertelsmann's quest to keep the controversial Napster alive has cost the media giant more than $100 million--and it could become even more expensive. The deal with music publishers will cost the company $36 million up front--the $26 million settlement, and another $10 million as an advance on future licensing fees.

That money, sources close to both companies say, is coming from Bertelsmann's pockets. Add to that the near-$60 million original loan the media company gave Napster last year, as well as a second loan "in the $7 million to $12 million range" extended to the company in midsummer, sources say, and Bertelsmann's outlays well exceed the century mark.

Anti-piracy features making their way onto CDs promise to dramatically alter the online music landscape, potentially handing Microsoft a potent weapon against the leading MP3 format and other rivals in the high-stakes battle over digital-audio standards. The record industry is experimenting with a new strategy for protecting CDs from being copied in CD burners or on computers.

Unlike previous anti-copying measures, this plan will place two versions of an album on a single disc: one in standard CD form, modified so that it can't be transferred to a computer hard drive, and another in Microsoft's Windows Media Audio digital format, rigged so that files can be copied to a PC, but with some restrictions on how they can be used.

Telecom turmoil
Web-hosting company Exodus Communications said it has filed for Chapter 11 bankruptcy. Shares were halted earlier in the day pending the news, which was widely expected. Exodus Chief Executive William Krause said the actions allow the company to continue to provide service to its customers. "This restructuring action ensures we have the wherewithal to do that, and our daily operations continue uninterrupted as before."

Excite@Home may soon file for bankruptcy protection, raising the possibility that AT&T will acquire the struggling broadband provider for pennies on the dollar. Sources say Excite@Home will file for Chapter 11 bankruptcy protection late this week or early next week unless it receives an unexpected cash infusion.

Excite@Home, the nation's largest high-speed Internet service provider with about 4 million customers, does not have enough cash to cover its operating costs and an estimated $800 million or more in debt. A Chapter 11 filing would shield the company from creditors while it reorganizes its business. Separately, Excite@Home continued to pare employees and alter its strategy, announcing that it will lay off 500 employees.

Meanwhile, AT&T is in talks to merge its long-distance and business networking assets with BellSouth, sources confirmed. A proposal, still in the early stages, could fall apart and may be predicated on AT&T shedding its broadband business, according to industry sources. Furthermore, other suitors could enter the picture. Comcast may soon receive permission to look through the books of AT&T Broadband, as a precursor to a possible deal between those two. That would allow a BellSouth combination with the remainder of AT&T to move forward, sources said.

Such a combination would essentially be a death knell for AT&T--one of the world's most recognizable brands. Saddled with debt because of an expensive foray into the cable business, the telecommunications company already is looking to break apart as a way to focus its efforts.

Also of note
As dot-coms fail and tech giants lay off thousands of workers, employees frequently walk out the door with desktop computers, telephones and handheld devices--even heavy office furniture, copy machines, research devices and sophisticated computer servers...An underground network of enthusiasts is setting up wireless access points that let neighbors and passers-by roam the streets of urban areas and access the Internet wirelessly, at blazing speeds, for free...Antivirus companies warned that an e-mail message asking for peace between America and Islam actually carries an extremely malicious and destructive payload...Struggling PC maker Gateway will part ways with chipmaker Advanced Micro Devices once again...Separately, AMD announced that it will lay off 2,300 workers by the end of the second quarter of 2002--or 15 percent of its work force--and close two fabrication facilities...Some airlines are revving up their online ticket programs again, bringing back the popular, cheap e-fares and offering such bargains as a $100 round-trip coast-to-coast ticket and $60 round-trip flights within California--the lowest prices seen in decades.

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