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The week in review: Napster loses one, then wins one

One of the most popular and controversial services on the Internet wins a temporary reprieve--just hours before it was to shut down.

One of the most popular and controversial services on the Internet won a temporary reprieve--just hours before it was to shut down.

A ruling from the 9th U.S.Court: Let Napster music play on Circuit Court of Appeals allows the music-swapping service Napster to remain in operation, when a previous court order would have forced the company to halt the sharing of copyrighted music--effectively shutting it down. The ruling handed the recording industry its first major victory against online piracy and touched off a flurry of angry postings on a Napster message board.

The order, however, did not directly affect the estimated 20 million people who have used Napster's software to download countless MP3-encoded songs since last year. The record industry would have to file separate lawsuits against individuals, which is highly unlikely.

Napster faithful around the world threatened record company boycotts and said they would download in droves during the waning hours before an injunction to cease all illegal music-swapping online was scheduled to take effect.

Market sell-off
Disappointing earnings news and ambivalent economic reports joined forces yesterday, causing investors to bail out of U.S. stock markets. The Nasdaq fell 179.23, or nearly 5 percent, to 3,663. The Standard & Poor's 500 index dropped 29.73 to 1,419.89.

The Dow Jones industrial average fell 74.96 to close at 10,511.17, led by Intel, which closed down $7.88 at $129.13. Microsoft rose 31 cents to $69.69. The Nasdaq closed down nearly 11 percent from its close of 4,094.45 last Friday. The Dow slipped 2 percent for the week, and the S&P 500 fell 4 percent.

Wishin' and hopin'
Beleaguered Silicon Graphics introduced a bold new Unix server design as an important part of its hopes for financial recovery. The company is returning to its roots as a manufacturer of slick, high-powered computers that wow technical users.

Many companies are blaming component shortages for poor sales and earnings. Parts shortages affecting two top-selling computer systems cost IBM $250 million in lost sales last quarter, according to an internal memo. The division lost $69 million, down from a loss of about $169 million in the previous quarter.

Micron Technology quit selling 64-megabit memory chips for less than $8 as demand for servers and consumer electronics is outstripping the ability of manufacturers to produce memory. Memory prices are rising, presaging an end to easy discounts.

Delta Electronics has seen its business soar as technology companies clamored for the firm's video displays, switching power supplies and networking products. But demand for telecommunications equipment more than doubled in a year, resulting in a parts shortage that troubles managers of the Taiwanese company.

Sony predicted the worldwide componentry shortage will slash its operating profit for the year by 10 percent. Executives said the shortage is worsening, and the company is desperately seeking electronic capacitors, LCDs and flash-memory chips.

Fun and games
Objections to the sale of confidential customer information have driven Toysmart.com to temporarily pull its customer list from auction. The failed online toy retailer had been trying to sell its list to the highest bidder, raising privacy concerns. Toysmart said it would temporarily remove the customer list, which the company had attempted to auction to pay off its debts, because it had not received an acceptable offer.

Microsoft expects to spend $500 million to market and sell its forthcoming Xbox video game console, the most money the software giant has ever spent to launch a new product. The investment will include marketing, advertising and support to retailers and third-party software makers.

Just as online pet store Pets.com was starting to cash in on its wildly popular mascot, the actor behind the goofy sock puppet is playing dead. Michael Black, the comedian who plays the Kermit the Frog-like spokesdog, is one of about 135,000 actors on strike against the advertising industry.

Head office shuffle
Amazon.com's chief operating officer Joseph Galli resigned from the online retailer to become CEO of business-to-business exchange VerticalNet. His departure after just 13 months at the helm came one day before the company reported stalled sales in second-quarter earnings. In leaving, Galli walked away from nearly 4 million shares that could have been worth more than a billion dollars but are worthless today.

Marimba chief executive Kim Polese kicked herself upstairs to make room for a CEO with more operations experience. Long a media darling as one of Silicon Valley's few female chief executives and prominent engineers, Polese first gained notoriety for her role in jump-starting Java, Sun Microsystems' cross-platform programming language. She subsequently launched Marimba in the then-red-hot market known as "push" technology. IBM named Sam Palmisano to become its president and chief operating officer and John M. Thompson to the position of vice chairman in what could be the first stages of a succession plan for Lou Gerstner. The promotions of the longtime IBM veterans come at a time of inconsistent growth for Big Blue.

Shares in Linux leader Red Hat dropped more than 12 percent after chief financial officer Hal Covert announced he was leaving for the same position at SGI, after just four months with Red Hat. Covert joined Red Hat in March after stepping down as CFO of graphics software powerhouse Adobe Systems.

Also of note
In Microsoft's latest move to prevent its breakup, the software giant asked the Supreme Court to allow a lower court to hear an appeal in the company's landmark antitrust case ? Starstruck fans, angry detractors and inquisitive neighbors paid $9.95 to ask O.J. Simpson questions during a live Webcast ? The Federal Trade Commission approved a proposal to let the online advertising industry police itself when it comes to collecting and trading consumer data ? America Online will make its software compatible with programs the blind use to convert digital information to speech or Braille ? Asia and Latin America drove growth in the PC market in the second quarter, perhaps foreshadowing some interesting new dynamics for the market.