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Week in review: Merger mayhem

It wasn't long ago that most companies were happy to merge, but that may not be the case for the Magic Kingdom.

It wasn't long ago that most companies were happy to merge, but that may not be the case for the Magic Kingdom.

Cable TV giant Comcast launched a surprise $66 billion bid to merge with Walt Disney, a deal that would create one of the largest media companies in the world. The proposal comes after private conversations earlier this week, in which Disney Chief Executive Michael Eisner rejected Comcast's request to begin merger negotiations, the cable company said.

If completed, the deal would create a media and distribution empire rivaling the size and influence of AOL Time Warner (which in September 2003 dropped America Online from its moniker) and would be sure to raise eyebrows across regulatory and public-interest circles.

Many see Disney's failure to capitalize on the digital revolution in entertainment as a key factor in the company's vulnerability to Comcast's hostile takeover bid. To those familiar with its history and culture, the weakness in digital technologies reflected a loss of core values, on which Walt Disney founded the company.

Critics say it is not surprising that Comcast and other rivals believe that they could do better than Disney in managing its digital direction. Disney has engaged in a series of mistakes in the transition from analog to digital technologies in the past several years, ranging from the Internet to animation advancements.

PeopleSoft isn't anymore eager to merge. Its board of directors rejected Oracle's revised hostile bid, saying it believes the company is worth more than $26 a share.

In citing its rejection of Oracle's revised bid, PeopleSoft said the company is currently trading at the low end of its historical valuation range, based on its forecast for future earnings. The company attributed the low valuation range to uncertainty Oracle's bid created.

Antitrust division lawyers at the U.S. Department of Justice are also against the merger. They are recommending that the department file suit to block Oracle's acquisition of PeopleSoft, indicating that Oracle may face a serious setback in its embattled bid for its rival.

Staff recommendations on antitrust cases usually provide an early indication about which direction the department is likely to lean in its final decision. Oracle Chief Executive Larry Ellison said months ago that an unfavorable decision from the Justice Department would put an end to the bid, but he recently said he would be willing to challenge the Justice Department if it ruled against Oracle.

Microsoft's misery
Microsoft released a fix for a networking flaw that affects every computer running Windows NT, Windows 2000, Windows XP or Windows Server 2003. If left unpatched, the security hole could enable a worm to spread quickly throughout the Internet, causing an incident similar to the MSBlast attack of last summer.

This is the second time this month that Microsoft has warned users of a security flaw. The latest flaw affects code many Windows applications share, and if left unpatched, it causes each program that uses the code to be an entry point into the operating system for an attacker.

However, the six-plus months it took to create the patch is the longest the software giant has taken to release a fix since it started its Trustworthy Computing Initiative, a companywide mandate to make security a top priority.

Taking so long to fix a serious issue has cast doubts on how much progress Microsoft has made in the two-year effort. Microsoft defended its responsiveness to security issues, saying the time required for each step in the patching process--from discovery and verification of the problem to creating and testing the fix--can vary.

Microsoft is also investigating how a file posted to several underground sites and chat rooms contained some protected source code to Windows 2000. A spokesman said incomplete portions of Windows 2000 and Windows NT were illegally posted to the Internet.

"It's illegal for third parties to post Microsoft source code," Spokesman Tom Pilla said. "We obviously take that very seriously." Microsoft said it is investigating how the code got on the Internet and is working with law enforcement.

Deceptive practices
Some anti-spyware companies are using deceptive practices and "hijacked" Web browsers to scare Net consumers into buying their products, a leading Internet public interest group told federal regulators. In a complaint filed with the Federal Trade Commission, the group said software developer Mail Wiper and its marketing affiliate Seismic Entertainment Productions have misled consumers in promotions for anti-spyware software.

The privacy rights group asked regulators to launch an investigation of Mail Wiper, which produces a product called "Spy Wiper," and Seismic. It wants them to block the companies from using deceptive advertising practices or "home page hijacking" techniques in the future, according to the complaint.

The charges come amid a rise in complaints about alleged unethical advertising tactics among anti-spyware companies, with some recent incidents going considerably beyond deceptive marketing. A CNET News.com investigation last week found evidence of "anti-spyware" products that actually installed software widely viewed as spyware, without giving any notice.

Net surfers should also be aware of instant messages bearing news of Osama bin Laden's capture. Several victims told CNET News.com that a new Trojan horse advertising program, called BuddyLinks, masquerades as a news Web site with a story on the al-Qaida leader's capture in an attempt to fool users of America Online's instant-messaging program into downloading software and receiving advertising.

Although the software has some of the properties of an Internet worm, the program has been classified by security software company Symantec as a lesser form of an irritant known as adware. BuddyLinks doesn't qualify as malicious, because it doesn't delete anything and can be easily uninstalled.

The worm turns
Two worms are taking advantage of computers whose security has already been compromised. The two opportunistic programs--dubbed Doomjuice and Deadhat--threatened only those users still infected with a version of the MyDoom virus.

Doomjuice, which has had a moderate spread, attempts to direct any reinfected PC to attack Microsoft's Web site. The reinvigorated attack may be responsible for making Microsoft's site inaccessible earlier this week.

The Doomjuice virus also places the source code for the original MyDoom virus on victims' hard drives, an action equivalent to planting evidence. The author may be using the tactic to create a crowd of PC users in which to hide, or the author could be spreading the code in hopes that other virus writers will create variations on MyDoom.

Also of note
Handing a partial victory to Internet phone providers, federal regulators said voice communications flowing entirely over the Internet are not subject to traditional government regulations...VeriSign reports that attempted site hacks, online fraud and identity theft are growing rapidly, as e-commerce proliferates...Major League Baseball is playing hardball, as it shops its coveted online broadcast rights to the Web's heaviest hitters, leaving potential partners fuming at the plate.