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The week?s news: Lycos buyout not a home run

Barry Diller?s USA Networks agrees to assume a controlling interest in the Net's fourth-largest property, but some investors balk.

Barry Diller's USA Networks signed a deal with Lycos to assume a controlling interest in the Net?s fourth-largest property, ending long-running speculation over the Massachusetts portal's fate. But the low premium price caused some investors to balk.

The deal, which combines the portal's search directory and community sites with three USA Networks properties including Home Shopping Network, reflects a new direction for online companies and a growing focus on electronic commerce. Lycos chief executive Robert Davis will become president and chief executive.

Soft reaction
Investors seemed disappointed in the offer, apparently believing USA Networks is getting the better end of the complicated transaction. Shares fell as much as 18 percent the day after the announcement, dragging down the entire tech sector.

Lycos' largest shareholder said it wouldn't vote to approve the transaction; meanwhile, the chief executive of Seagram's, which owns a controlling interest in USA Networks, defended the deal by saying Lycos had been trading at an unrealistic price.

The agreement certainly makes for some strange bedfellows, as Lycos's collection of Web sites--including Wired Digital and the irreverent Suck.com site--finds itself teaming up with a business that sells cubic zirconium jewelry on television, among other things.

Art of the deal
America Online stands to net $1.25 billion from Sun Microsystems over three years by result of a deal allowing Sun to sell Netscape software on behalf of the Internet giant. In effect Sun is underwriting a significant portion of the $4.2 billion Netscape buyout in return for a guarantee of $500 million in sales of hardware and services to AOL. Sun previously had little business with the world's largest ISP, which last week announced it added another million members (to reach 16 million) in a little over five weeks.

In a deal rumored over the past several months, Electronic Data Systems and MCI WorldCom agreed to a $17 billion computer services pact in which EDS will buy MCI WorldCom's Systemhouse IT services unit for $1.65 billion and take on more than 12,000 MCI WorldCom employees. The companies will also exchange outsourcing agreements. Separately, MCI won a new government contract to be the exclusive provider of long distance service to Army and Air Force bases around the world for the next seven years, a deal worth as much as $1.5 billion.

MCI's better-than-expected



Give us a click and we'll give you the week! CNET Radio newscasts from the week of February 8-12.
 
fourth-quarter results of 23 cents a share beat the Street by a penny. But while the telephone may still be king, final figures from some of the biggest communications companies show that data revenue may soon eclipse revenue from traditional phone services.

SBC Communications will take a stake in Williams Communications, a move that gives the Baby Bell a foothold in a national high-speed network. The investment is designed to let SBC eventually compete on a head-to-head basis with long distance giants such as AT&T and MCI.

CBS upped its share of SportsLine USA to 18 percent--with an option to increase to 27 percent--in exchange for $100 million worth of network promotion and increased offline marketing over five years. The agreement cements a strategic TV-Net relationship through 2006.

Yahoo broadened its small-business offerings, adding a Web-hosting service and outsourced intranet services, and also said it would begin charging a fee in exchange for expediting listings, raising some eyebrows.

Amazon.com caused a greater flap over plans to feature books and authors in return for a fee paid by publishers. caving in to outcry, the company said that beginning March 1, it will disclose which featured books are paid for.

Head to head
AMD, which has been overwhelming rival chipmaker Intel in the personal computers found on retail electronic store shelves, won the backing of leading game publishers and developers, who pledged to support the Sunnyvale, California, company's 3DNow technology in several hundred of their most popular game titles.

The announcement may dampen some of the sizzle surrounding Intel's Pentium III, due later this month. Industry observers also say it's not clear what will compel consumers to buy systems with the new chip.

The two companies also dueled in the low end of the market, as Intel cut prices on its Celeron line and AMD followed. Some analysts wondered how the strategy will ultimately impact Intel, but said it's likely to put more pressure on AMD's profit margins.

Dell Computer introduced a program aimed at boosting the effectiveness of its print advertisements while making it easier for consumers to buy systems over the Internet. The E-Value scheme enables a customer to type in a number from a printed ad, for the correct system configuration and price to pop up, taking the confusion of "speeds and feeds" out of play.

Hewlett-Packard will jump-start its PC division by releasing a new line of compact, design-intensive Vectra and Brio PCs and unveiling a $100 million branding campaign aimed at business buyers. The moves are designed to energize a company growing at a slower rate than both Dell and Gateway.

The worst may be over for the Asia-Pacific PC market. After a steep decline last year, PC sales in the region grew 7 percent from the fourth quarter and more than 11 percent sequentially, according to a research firm. Total PC shipments in the area, excluding the Japanese market, reached 2.89 million units in the quarter, the highest ever.

Contract manufacturers are rapidly taking over the manufacturing end of things for PC makers, consumer device designers, and communication equipment providers. A $90 billion industry in 1998, contract manufacturing is expected to nearly double to $178 billion in 2001 as more and more name-brand manufacturers seek to take advantage of the manufacturing capabilities and Third World labor pool of the contract builders.

At issue
The Federal Trade Commission will introduce allegations at next month's trial with Intel that go beyond those made in a complaint filed last summer. The new allegations stem from recently unearthed evidence that Intel allegedly threatened computer makers Micron Electronics and Silicon Graphics. Additionally, a government economist is likely to allege that Intel's conduct harms the markets for chipsets and "motherboards"--not just the market for microprocessors.

State employees in Virginia--ranging from professors to social workers and clerks--do not have a First Amendment right to access sexually explicit communication on the Net, even if the research is job-related, a federal court ruled. State employees are prohibited from using Virginia-owned computer equipment to access or store sexually explicit content, unless a person gets written permission from a supervisor.

Congress will again tackle the question of whether database owners should receive copyright protection for the public facts they compile and resell. From Web crawlers to medical journal articles, nationwide court rulings, phone directories, and stock quotes, electronic database operators don't own the facts they catalog but profit from aggregating and updating data.

Playboy alleged in a federal lawsuit that Excite and Netscape are violating its trademark by serving up other companies' banner ads when surfers seek out the magazine's Web site. the company aims to aiming to prohibit them from generating hard-core porn advertisements when visitors search for the term "playboy." Excite's search technology powers Netscape's portal.

Sun opposed Microsoft's Java appeal, arguing a federal judge acted properly in ordering Microsoft to modify its operating system and Internet browser products so that they are compatible with Sun's programming language.

Microsoft executive Brad Chase testified that rival Netscape can garner new browser users from Internet downloads, but the government argued that the software giant's own figures showed something else and said downloading can't provide real competition. Separately, vice president Cameron Myhrvold testified that the software giant's contracts with Internet service providers were intended to limit consumers' ability to choose a browser other than Microsoft's Internet Explorer.

High wireless act
US West is looking to wireless technology as a solution to bringing broadband Net acess to remote areas. Stepping ahead of its Baby Bell brethren, the company will start trials of a Qualcomm-built access system in April.

Wireless companies such as AirTouch Communications and AT&T as well as equipment makers like Nokia and Ericsson are devising strategies to capitalize on the booming demand for accessing information from anywhere. Having already cut into traditional voice markets with special one-rate pricing and roaming plans, the wireless world now wants a piece of the Net action.

@Home Network is forging ahead with its international plans by reaching out to foreign content developers and continuing talks in Japan and the United Kingdom. The leading U.S. cable modem service expanded its Media Development Program to encourage overseas multimedia and application developers to create content for the company's broadband network.

Also of note
Over half of all U.S. homes now have a personal computer, a large jump from three years ago ... Microsoft and a marketing firm offered a free copy of Office 2000 to users who undertook a three-hour questionaire, but pulled the promotion because of overwhelming response ... Netscape determined that corrupted cookie files, not a browser bug, are responsible for revealing user passwords and mailing addresses on some server log files ... Buy.com raised customers' ire after mistakenly advertising a monitor for an inexpensive price and then refusing to honor most orders ... Microsoft online magazine Slate retreated from a year of selling subscriptions, saying content would again be free ... AOL and CNET (the publisher of News.com) struck a content deal for the latter to provide computer buying guides to the proprietary service.