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The week in review: AT&T wins bidding war, Microsoft investment

AT&T tops Comcast in a much-publicized bidding war for MediaOne, but side deals could reshape the high-tech industry as well as cable and telecommunications.

    AT&T topped Comcast in a much-publicized bidding war for cable company MediaOne, but side deals could reshape the high-tech industry as well as cable and telecommunications.

    Ma Bell's surprise $54 billion counteroffer was accepted by MediaOne's board of directors on Sunday, giving Comcast until Thursday to reply. Tuesday evening the Philadelphia company threw in the towel, settling for a $1.5 billion termination fee and an agreement with AT&T to swap regional cable systems in the interests of concentrating networks. The switch gives Comcast a potential net gain of 2 million subscribers, at a cost of about $9 billion.

    Changing landscapes
    Comcast also agreed to offer AT&T-branded telephone services "on an expedited basis" and at the "most favorable terms" AT&T is offering other potential partners, including Time Warner. Both the MediaOne victory and Comcast's consolation prize--along with AT&T's recently completed acquisition of Tele-Communications Incorporated--demonstrate the phone giant's eagerness to compete in local phone markets by means of cable lines, a compelling but unproven bet.

    Before AT&T had won out, Microsoft and America Online had each signed a confidentiality agreement with MediaOne allowing them to examine the company's books, as both were interested in joining Comcast's failed effort. AOL dropped out of the picture, but Microsoft ended up taking a $5 billion stake in AT&T and won Ma Bell's commitment to use the Windows CE operating system in 5 million forthcoming TV set-boxes.

    Redmond's latest gambit--apparently a quid pro quo deal--demonstrates the software giant's increasingly prevalent strategy for making sure it is not left out of emerging technology opportunities. Armed with plenty of cash and a $1 billion investment in Comcast, Microsoft garnered a better deal for its software business and closer ties with a rapidly transforming telecommunications powerhouse.

    Meanwhile, AOL for now looks the big loser.

    Unconstitutional restriction
    In a 2-to-1 vote, the Ninth Circuit Court of Appeals affirmed a district ruling that U.S. export limits on encryption are unconstitutional. Daniel Bernstein vs. the Justice Department, handed down in 1997, states that software source code is a language, and therefore the export controls violate the University of Illinois math professor's First Amendment right. Clinton administration policy treats software cryptotography as falling within the interests of national security.

    The Justice Department is expanding a two-year antitrust investigation of Network Solutions, the dominant registrar of ".com" and other domains, to focus on the company's claim that it owns the database used to route traffic on the Internet. As NSI prepares to face competition for the first time, it has undertaken some controversial changes in how it maintains the so-called Whois database. The database, compiled while NSI was a government-approved monopoly, maps out addresses and contains the business contacts behind more than 3.5 million domain names.

    On the other hand, nine days after the Commerce Department launched the trial phase of its plan to open up domain name registration, NSI remains the sole registrar that's up and running. At least two of the five "test-bed" registrars announced two weeks ago still have not obtained the software necessary to access the master registry maintained by NSI, and none of the companies have said when they will start selling domain names under the shared registration system.

    The World Intellectual Property Organization has released a plan for curbing "cybersquatting," which would require domain name registrants to provide accurate contact information and pay for names up front. Speculators would face tougher restrictions if the proposal is widely adopted.

    Equal access
    The World Wide Web Consortium (W3C) standards body released final technical guidelines to help page authors make sites easier to use for those whose access is impaired. The guidelines, pitched as fairly simple to implement, also could improve surfing for people who access the Web via mobile phones or handheld devices.

    The White House announced the Parents' Protection Page, a resource intended to help parents block minors' access to violent and other "inappropriate" Net content. Al Gore's plan, which aims to put child safety resources just "one click away" from parents' grasp, is being backed by major online companies, including America Online, AT&T, Disney Online, Network Solutions, and Yahoo.

    With less than seven months to go before the new year, both the House of Representatives and the Senate are slowly hammering out bills intended to limit lawsuits that may arise from Year 2000-related computer problems.

    When Microsoft's antitrust trial resumes, the company will attack the credibility of a senior America Online executive and grill him about his company's $10 billion acquisition of Netscape Communications. The decision to call AOL's David Colburn as a hostile witness is considered a bold move, since he performed well under previous cross-examination.

    More access
    3Com's new wireless division will unveil plans next week to build technology that links PCs, PalmPilots, cell phones, and other devices to each other--and to the Net--without wires. 3Com envisions a future where employees can take their notebook PCs to a meeting and have wireless Net access and email.

    Nortel disclosed plans to unveil new networking technology that can potentially deliver speeds and capacity 640 times faster than current technology for fiber-optic networks. The technology, not due to ship commercially until next year, could give Nortel a boost with its telecom carrier customers, many of whom are currently upgrading and expanding their networks to meet the demands of increased Net traffic.

    SAP is planning a portal site to connect users to customers and business partners across the Internet. Expected by the fourth quarter, it would serve as a focal point of SAP's Internet strategy and is intended to provide one stop for everything from ordering an online catalog to scheduling corporate meetings internally to communicating with suppliers.

    Analysts are calling EDS's plan for e-commerce a copycat, although executives beg to differ. There appear to be striking similarities between EDS's plan, which was sketched out this week in the wake of layoffs and cutbacks, and that of first-place rival IBM Global Services. "It's," one said.

    Informix appointed a new chief executive, Jean-Yves Dexmier, who said e-commerce and data warehousing is key to the company's continued resurgence.

    Wang Global, the latest incarnation of the former hardware maker, was acquired by Dutch computer services firm Getronics for about $2 billion. The company had been a pioneer in the minicomputer era of the 1980s.

    Out of the market
    National Semiconductor will exit the PC chip business and lay off more than 500 people because of financial losses and declining prices. National, which will continue to make processors for so-called embedded devices such as TV set-top boxes, said it will "focus on the emerging information-appliance market and on its traditional analog [chip] business."

    Although National holds a relatively small market share in processors, the effect will likely be important. Its Cyrix division is a leading provider of processors to sub-$500 computers. Without Cyrix, whose processors cost less than those from AMD or Intel, those PC prices could rise.

    Advanced Micro Devices is planning on challenging Intel in the server and workstation market next year with chip packaging and bus technology that will allow computer makers to build multiprocessor systems featuring its top-of-the-line K7. The new interface is tentatively called "Slot B."

    Sun Microsystems is making good on its pledge to seek recognition for Java as international standard, notwithstanding a recent change in plans, but some observers aren't sure if it's worth it. Sun has submitted a proposal to the European Computer Manufacturers Association to bring a Sun-controlled Java standard to the International Standards Organization.

    Also of note
    Personal computer sales in Western European grew 20 percent in the first quarter of 1999, driven by strong sales to home users ? When it comes to overseas sales, computer makers and dealers are running into conflicts with long-established commercial policies, details such as electric-voltage variations in different countries, and even trade regulations ? Microsoft released the update to its Windows 98, called Second Edition, to PC makers and CD-ROM manufacturers ? Online brokerages processed a record 630,000 trades a day in April, thanks to investments in companies that do business on the Internet ?TransPoint, a joint venture of Microsoft, First Data, and Citibank, finally launched its online billing service for 5 million consumers ? MCI WorldCom and Nextel Communications ended talks about a possible merger ? Time Warner's ill-fated supersite will be memorialized by the Pathfinder Museum.