CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

The week in review: Compaq, Gateway worried about memory losses

Micron Technology signs long-term memory chip agreements with Compaq Computer and Gateway, evidence of the computer industry's supply concerns.

    Micron Technology signed long-term memory chip agreements with Compaq Computer and Gateway, evidence of the computer industry's anxiety over supply disruptions.

    On Monday, the leading U.S. memory chipmaker inked a five-year deal with Compaq said to be worth $20 billion, and on Wednesday signed a separate five-year pact with Gateway. The agreements come as recently rising DRAM (dynamic random access memory) prices have begun squeezing already tight PC profits.

    Built-in memory
    Micron's non-exclusive agreement with Compaq appears to commit the Houston-based PC maker to buying a certain percentage of its memory chips from Micron, rather than an absolute number. The Gateway deal similarly calls for Micron to supply the second-largest direct sales PC maker with a "near majority" of memory chips for its PCs.

    About $20 billion worth of DRAM is sold each year, 70 percent of which goes to PC makers. Compaq's world-leading PC market share totals about 13 percent.

    PC companies, busy installing "build-to-order" manufacturing plans, have been concerned to solidify their supply of components. The scheme calls for a minimum of inventory so products don't lose value, but September's Taiwan earthquake and the subsequent disruption in memory chip manufacturing has jolted PC makers into the realization that putting less memory into a system is an unpopular option with many consumers.

    Last week, Dell Computer lowered earnings expectations for its third quarter in part because of memory price increases. The Texas company told financial analysts that rising memory prices would add about $75 extra cost to every computer it sells.

    Weighing in with a contrarian view, analysts say the price increases have been created more out of fear than any long-term supply condition. One called deals to secure memory chip supply "a bit premature because we don't believe demand has yet reached capacity."

    Separately, notebook PC companies and display manufacturers agreed to a standard for current and future notebook displays, a plan which may eventually help alleviate shortages that have hit Dell, Compaq, and Apple this year. Compaq, Dell, Hewlett-Packard, IBM, and Toshiba participated in the working group that hammered out the new specification, along with market research firm DisplaySearch.

    The big time
    Microsoft and Intel were added to the Dow Jones Industrial Average, the first time Nasdaq-listed issues have been represented on the blue-chip index. The change underscores the level to which technology has affected the economy in the United States in the last few years. It's unlikely, however, that any Internet companies will soon be added.

    Data and Internet revenue was one of the key growth areas for telephone companies including MCI Worldcom, AT&T, and Qwest in the latest financial quarter. Faced with shrinking profits in their core local and long distance voice businesses, most of the nation's largest communications firms are building state-of-the-art networks or consolidating to take advantage of the growing demand for Internet and data services.

    Net start-ups like EFax, OneBox, JFax, and Ureach are in the vanguard of the "unified messaging" market, bringing together fax, email, voice mail--and ultimately telephone calls--into a single Web mailbox accessible by phone or PC. But these new services are edging onto the turf of telephone companies and big Net firms like Yahoo and Microsoft--a fact that casts a threatening shadow over their burgeoning businesses.

    Cisco is looking to jump-start the nascent wireless business by culling interest and support from a wide array of partners for a proposed technology standard, ideally helping in the development of new wireless networks. The giant also plans to unveil new products based on the still-developing technology by the end of this year. Some analysts view Cisco's plans as too ambitious for a company that has not yet dedicated much time and energy to the wireless market.

    A new order
    Dell Computer pushed aside Compaq for the top spot in U.S. PC market share, claiming the leading role in the world's largest market from the longtime front-runner for the first time. Compaq retained worldwide leadership. More broadly, third 1999's third-quarter statistics read like Exhibit A for the direct sales method. Dell grew more than two times faster than both the U.S. and worldwide markets, while Gateway clipped along at more than 1.5 times the market.

    Compaq topped lower earnings expectations, reporting net income of $117 million, or seven cents a share, on revenues of $9.2 billion. But the beleaguered company spent the third quarter diligently cutting costs--discharging nearly 3,000 workers, unloading unprofitable units, consolidating facilities, and attempting to streamline distribution--and still lost money on its flagship business PC line, which accounts for approximately 30 percent of revenue.

    Chips for cell phones, set-top boxes, high-speed modems, and Internet devices will all become a larger part of Intel's business plan, company executives said, even though Intel has worked hard to associate itself with the personal computer. Chips for PCs and servers will likely continue to dominate, but as more types of devices are used to access the Internet, Intel will move to provide silicon for these so-called information appliances.

    Microsoft is holding meetings and hammering out strategies on a potential plan to enter the game console market. This week the software giant played host to representatives from Thomson Consumer Electronics and Toshiba as well as game developers and other PC firms, discussing the "X-Box," a code name for an entertainment console that could rival similar products from Sony, Nintendo, and Panasonic. The product could threaten the PC's dominance in the home, especially as an Internet access device, but wouldn't necessarily undermine Microsoft as it would be based on the company's technology.

    Apple's latest operating system hit stores last weekend, with some retailers holding "midnight madness" sales for the $99 software. On Monday, an existing trademark infringement lawsuit filed against the company was updated to include Mac OS 9. New York-based Imatec claims that Apple's ColorSync 3.0 technology infringes on patents held by the digital imaging firm.

    Going the other way
    Excite@Home will acquire popular online greeting card site Blue Mountain Arts for about $780 million in cash and stock. Blue Mountain is the 14th most-trafficked Web property and ranks third among e-commerce sites, behind and eBay. But some analysts anticipate a rocky transition for Blue Mountain, which up to now has cultivated a folksy, grassroots image.

    Meanwhile, Excite has been falling further behind front-runner Yahoo. In February, Excite had 18.1 million unique visitors to its site, according to Media Metrix; that number fell to 15.3 million in September. In the frenetic race to capture eyeballs and wallets, the goal of Web portals continues to be buy or die--even if it means acquiring a company with negligible revenue..

    Microsoft marketing man Rob Bennett and consumer strategist Brad Silverberg became the latest in a growing tally of key players who have decided to leave the software giant to start with other companies, travel, or spend more time with their families.

    Traditional brick-and-mortar retailers have been rushing to get onto the Internet, inspiring the term "bricks to clicks," but lately Internet retailers have turned the tables and begun to open physical stores, a trend called "clicks to bricks." Firms such as,, and even Gateway are betting they can win shoppers who are not yet online or wish for a convenient way to try out or return goods.

    Many antitrust experts believe U.S. District Judge Thomas Penfeld Jackson will use his findings of fact in the Department of Justice-Microsoft antitrust case to prod both sides to discuss a settlement. The findings could reveal the direction the judge is going and what conclusions of law he might reach. Typically, a judge would ask both sides to submit their conclusions of law before he or she rendered the findings of fact.

    Federal regulators intend to block Compuware's $162 million acquisition of management software maker Viasoft, saying the merger is anticompetitive. The move is another example of increased vigilance by federal regulators on consolidation within the high-technology industry.

    Election regulators failed to set clearer guidelines for political Web sites. The Federal Election Commission's agenda includes an inquiry by Republican presidential candidate George W. Bush, who wants to know if volunteer Web sites supporting his campaign are to be tallied as campaign contributions. If so, these sites could push candidates over their spending limits. The FEC has been deliberating how its existing rules for television and print advertisements apply to the global network.

    The House passed a bill to crack down on illicit domain name registrations, but a federal appeals court earlier handed down a decision that could make it easier for "cybersquatters" and small businesses which register trademarked names to stay in business. The bill's passage thus comes as the courts appear to be creating a body of jurisprudence that weaken the rights of trademark holders on the Net.

    A proposed international standard that would let Net surfers negotiate how much personal information they want to hand over to Web sites cleared a significant legal hurdle which had threatened its adoption. The World Wide Web Consortium released a legal analysis finding that the Platform for Privacy Preferences (P3P), which will be supported by Microsoft and Netscape browsers, doesn't violate a patent held by Intermind Corporation and won't be subject to licensing fees. Facing the possibility of stricter laws and pressure from the White House to bolster online privacy through technology and voluntary guidelines, many Net companies have steadfastly supported the recognition of P3P.

    IBM and Siebel Systems announced an expanded partnership to jointly sell, market, and support the latter's customer relationship management software. Following IBM's decision to close down its own CRM software unit, the agreement marks a major push by Siebel against archrival Oracle in the fast-growing market, projected to reach $16.8 billion by 2003 with annual growth rate of about 50 percent over the next five years.

    Separately, shares of small CRM maker Pivotal soared on news that Microsoft and Cisco picked the company for their applications hosting programs. The deal is one of many that front office software makers, which provide software to support call centers and sales forces, have inked with larger companies as the industry moves toward application rental.

    PricewaterhouseCoopers will cut 1,000 administrative and internal support jobs as part of its plan to focus on e-commerce. The move continues the notable shift toward Internet and e-commerce business among leading computer services firms as well as the so-called Big Five consultants. Some have launched hefty ad campaigns to highlight their direction.

    Also of note
    Microsoft will release its Windows 2000 operating system to customers on February 17, but deliver to CD-ROM and computer manufacturers in December, allowing the company to make its self-imposed 1999 deadline on a technicality ? PC makers face hard decisions as they unveil new systems around Intel's upgraded Pentium III processor, called Coppermine ? Despite Java's growing popularity, many big businesses just aren't ready to use it for their most important applications, according to a study ? Digital music distributor RioPort got a $30 million infusion, spinning off from its parent company, graphics chipmaker S3 ? Cisco and Microsoft advanced their business software partnership, introducing ways to deliver applications across a network. The initiative is aimed at small and medium-sized companies ? A "network routing issue" prevented as many as ten percent of all AOL Instant Messenger users from logging on to their accounts on Wednesday ? Aibo, Sony's 11-inch-tall robotic dog, a sellout in its Japanese release, will be available on a limited basis in the United States and Europe and be re-released in Japan starting in November.