The week in review: Maverick Apple joins the crowd

At a San Francisco trade show dedicated to the Macintosh, Apple tapped EarthLink to become its preferred ISP, an agreement that includes a $200 million investment in the Pasadena, Calif.-based ISP. Chief executive Steve Jobs also reported record iMac sales and took the wraps off the delayed Mac OS X operating system.

Diving in
Under terms of the deal, EarthLink will become the exclusive ISP in Apple's Internet Setup Software, included with all Macintosh computers sold in the United States. Numerous computer makers have struck such alliances to distribute their products.

The Cupertino, Calif.-based computer maker further said it will debut free email, e-greeting cards, remote Web storage and personal Web page hosting portal as part of a broad marketing effort that shows off the Macintosh platform. For years Apple has claimed its computers can provide a superior digital experience, and now the company is going to try to prove it on the Web. The new alliance with EarthLink will cross-promote these offerings, and the company may begin to try to squeeze revenue out of its portal-like services.

Customers snapped up some 1,350,000 Macs in the quarter, Jobs said. The computer has been at or near the top of the sales chart since its summer 1998 introduction.

On the software front, a beta of the new Mac OS X operating system will go to developers in the spring and will begin selling in the summer.

Jobs himself dropped the "interim" from his title. Also the chief executive of digital animation firm Pixar, he has run Apple since the middle of 1997 but previously resisted calling the position anything more than a temporary solution.

Y2K anon
A computer problem grounded planes in the Northeast Thursday, but a Federal Aviation Administration representative said the problem did not appear to be related to the Y2K computer bug. Though the world has ushered in the new century without any major millennium bug disasters, now that the holiday is over some minor glitches are cropping up.

Other problems
Gateway, among the first to establish ties with an ISP and a company that has seen substantial revenue growth through service fees, surprised Wall Street by warning that fourth-quarter financial results would fall below expectations. Hinting of a rift with chip giant Intel, Gateway blamed the problems on a shortage of processors and a Y2K-related slowdown.

Telephone equipment maker Lucent too warned that its first-quarter earnings will fall short of expectations, blaming the gap on the company's inability to meet customer demand for optical networking equipment, lower software sales and flat growth in wireless equipment. Lucent sank; shares of rivals Nortel Networks, Ciena Systems and others promptly skyrocketed.

The warnings came amid a generally difficult week for the high-tech industry. Tuesday, the tech-laden Nasdaq fell 229.66, or 5.56 percent, to close at 3,901.49 in trading. The greatest one-day drop in the market's 29-year history came just a week after the Nasdaq topped the 4,000 mark.

Expanding
Excite@Home launched a free ISP service in an effort to attract new users who could be converted into subscribers of its broadband Internet access service. The ad-driven service could play a more important role for Excite than similar free Net access initiatives launched by AltaVista and Yahoo, among others. Company executives are betting they can persuade many of their new dial-up users eventually to sign up for Excite@Home's high-speed cable Net service.

The launch puts Excite@Home's largest shareholder, AT&T, in a tight spot. The service competes directly with AT&T's dial-up WorldNet offering, one of the largest Internet service providers.

Intel further expanded its horizons beyond the microprocessor in detailing plans for selling Linux-powered Internet appliances that make phone calls, surf the Web and send and receive email. The chipmaker's branded product could work out some of the kinks that have held back Internet appliances, analysts said.

AMD sought to counter with an expanded relationship with Hewlett-Packard, winning a place in HP's notebook products for the first time, and announcing an 800-MHz processor that matches the giant's fastest chip. The back-and-forth rivalry between the two was further underscored by Gateway's hint that its earnings shortfall would prompt it to turn to AMD for relief.

Compaq Computer bought distribution facilities and other assets from Inacom for $370 million in cash, in an attempt to build up its "direct sales" capabilities in a hurry. The company has long struggled with programs designed to allow it to sell PCs and servers directly, rather than through dealers and distributors. The iPaq, an important new business system to be sold directly, is due this month.

Taking a cue from Apple, Compaq also introduced a stylized, easier-to-connect PC system. PCs that dispense with older connectors are cheaper to produce. Compaq is looking to reinvigorate its PC sales.

Distribution
RealNetworks outlined partnerships with music giants Universal Music Group and Sony, agreements that provide the software maker with access to a bevy of big-name artists. The RealJukebox software will incorporate a Universal-supported secure download format and several Sony technologies. The announcement marks the latest in a series of moves by the "Big Five" record labels to provide Net users access to their song catalogs.

Separately, Yahoo Broadcast agreed it will continue to use RealAudio and RealVideo streaming on its service despite rumors indicating that the companies' relationship was on the verge of collapse.

Cisco Systems launched a home networking initiative highlighted by the introduction of new technology and partnerships with Sun Microsystems, GTE and appliance manufacturer Whirlpool. The giant intends to deliver an "Internet home gateway" device by the fall of this year, allowing a family to link multiple PCs to a high-speed Net connection, and later all manner of home appliances and electronics devices. Cisco has classically shied away from low-margin, consumer-oriented products.

TiVo struck deals with Liberate Technologies and Blockbuster that will likely lead to a proliferation of its "video-on-demand" technology, possibly gaining a leg up on its main competitor, Replay Networks. Until recently, TiVo was mostly known for its "digital VCR" (DVR), a set-top box that recorded video and live TV onto a hard drive. With Liberate, TiVo boxes will be able to deliver Internet content along with video-on-demand, an entertainment package similar to strategies currently being fleshed out by Microsoft and AOL.

Try again
Cyber-savvy entrepreneurs looking to cash in on what appeared to be newly available domain names had their hopes dashed when the body that oversees the Internet's address system said hundreds of the names are not allowable. Network Solutions' registry accepted about 800 domain names containing a hyphen at the end or the beginning of an address. But such names have long been prohibited and therefore should be recaptured, said the president of the Internet Corp. for Assigned Names and Numbers.

Also of note
eBay said that the record $10 million bid for Web address Year2000.com turned out to be a prank ... Microsoft and Barnesandnoble.com will launch an electronic bookstore using Microsoft Reader software ... ReverseAuction.com agreed to a settlement with the Federal Trade Commission over charges that the company violated consumers' privacy and emailed allegedly "deceptive spam" to customers of rival auctioneer eBay.