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The week in review: Napster's tribulations

Legal challenges appear to check mushrooming use of the software, which creates a network for swapping MP3 files stored on computer hard drives.

Legal challenges appeared to check mushrooming use of Napster.

In response to a copyright lawsuit filed last week by rock band Metallica, two universities banned the software, which creates the means for swapping MP3 files stored on computer hard drives. Venture capitalists too have elected to keep their distance, wary of charges that Napster promotes piracy.

Some academic institutions initially blocked students from using the program because of concerns that music downloads were clogging their networks. But this week Yale and Indiana declared they would blacklist Napster out of regard for intellectual property rights. Yale, which acted first, was soon dropped from the Metallica case.

Investors are simultaneously fascinated by Napster's "viral" quality--the more computer users open their hard drives to one another, the larger the online music universe becomes--and frightened by the music industry's staunch opposition. The powerful Recording Industry Association of America targeted Napster almost as soon as it rose to prominence.

Nonetheless, some industry observers predict Napster-like file-sharing technology will be used to download many types of digital content.

Coming soon
Several major computer manufacturers are soon to release new high-end Unix servers. Sun Microsystems remains king of the hill despite the fact that its top-end system has been on the market for two years, in part because it remained focused on Unix servers just as corporations began embracing the online medium and at a time when Hewlett-Packard, Compaq and IBM were hedging their bets on Microsoft's rival Windows NT.

Intel pushed back the release of two desktop processors because of a manufacturing crunch that has created shortages. Two Celeron chips due next week will instead appear in June. Rival Advanced Micro Devices, which has a surplus, may benefit from the delay.

NeoMagic will shift its strategic direction to making processors for Internet appliances and wireless communications devices, becoming the fifth graphics chip specialist to change course just this year. Analysts have long predicted consolidation.

Microsoft launched Pocket PC, a new--and newly renamed--operating system for handheld devices. The giant hopes to avoid previous missteps in a market in which it has yet to make more than a dent.

Change of direction
IBM Global Services is struggling as it attempts to make the leap from traditional consulting to e-commerce services. The Big Blue unit this week surprised analysts by reporting flat year-over-year revenue growth, compared to expectations of a 6.5 percent gain. The industry's largest computer services organization contributes a whopping 39 percent of IBM's overall revenues.

Excite@Home posted subpar quarterly results, missing both profitability and analysts' estimates. Executives pointed to lower advertising revenue at portal Excite and other low-speed, or "narrowband," Web properties previously acquired by the company, and said they would focus resources on the fast-growing broadband market to entice access subscribers. The move may be an admission that the expensive purchases of Excite and Blue Mountain have been less successful than the company would have hoped.

Oracle seems to be rethinking its software rental plan. The company has repeatedly said it will only rent its business applications via its own Business Online subsidiary, but last month Oracle quietly inked a deal with ASP Portera to host financial, human resources and purchasing software for a select group of customers. Executives says the strategy hasn't changed, but analysts view the move as evidence Oracle needs additional avenues to reach potential customers, as competitors push into the market.

Cisco Systems gained a strong endorsement from SBC Communications, striking a multibillion-dollar alliance for a variety of Internet equipment. Cisco has been focusing its sales efforts on telecommunications carriers, hoping to gain a larger share of a market with annual sales of more than $50 billion. SBC, on the other hand, has found its business driven by Internet-based data, not voice communications.

Amazon agreed to put a permanent link to on its home page in what may be the first of several similar moves as the e-tailer tries to reach profitability. The deal isn't risk free. Putting third-party vendors on the site could confuse customers and spell trouble for Amazon if the vendor doesn't deliver.

Printing money
HP will work to integrate its huge printing business into e-commerce transactions and Internet use by means of a series of new alliances, including deals with FedEx and The company envisions documents will be sent electronically and then printed, a reversal of the process in which documents are printed, then faxed or mailed to their destinations. HP has either invested in the new partners or will share in those companies' revenue streams.

The long-awaited initial public offering of AT&T Wireless Group is expected next week, but the recent stock market places a cloud of uncertainty over the largest IPO ever by a U.S. company. Lingering jitters from last week's market collapse and the huge number of shares being sold could dampen investor enthusiasm for the tracking stock.

Cabletron Systems aims to transform itself into an investment firm by sinking money into networking start-ups. After the company spins off four subsidiaries as part of its reorganization, the network equipment maker will have between $1.5 billion and $2 billion in cash. Executives plan to nurture emerging companies in the hot field, and also intend to act as a bank for Cabletron's subsidiaries so they can make acquisitions.

Canadian police arrested a 15-year-old known online as "Mafiaboy" in connection with a number of debilitating attacks on some of the Internet's most popular Web sites earlier this year. Mafiaboy stated several times that he was responsible for the February assaults in Internet chat rooms, according to police.

Sweden's My Solutions released software dubbed MyCQ that allows people to simultaneously log on to multiple messaging products and communicate on all of them through a single interface. Though largely untested, it could reduce the gap between rival instant messaging products by making it easy to register for and manage multiple accounts. Leader America Online has fought vigorously to fend off companies hoping to pry open its hugely popular services.

People carrying around handhelds, cell phones and other wireless devices could soon find themselves pelted with a hail of pesky ad pitches, privacy advocates warned. A trade group met for the first time this week to come up with industrywide privacy guidelines and set standards for the still-developing wireless Web. Some companies are already beaming location-sensitive information to subscribers who have revealed their ZIP codes or other identifying data.

Also of note
Slightly more than a third of Internet retailers are making a profit, driven by continued market growth for Internet shopping, according to a survey of 412 companies ... Net ad revenues surged last year, hitting $4.62 billion, in a sign that marketers are no longer questioning whether the Web is a good place to invest ad dollars ... Online brokers E*Trade and Charles Schwab have written customers urging them to stay calm and focus on long-term investment plans as violent swings in the stock market continue ... Linuxcare lost its second senior executive in two weeks, a key departure that creates a potentially serious roadblock to the company's delayed initial public offering plans ... SAP America chief executive officer Kevin McKay resigned, following another quarter of shrinking profits at the German business software giant ... Oracle chief executive Larry Ellison is within striking distance of surpassing the net worth of his longtime foe, Microsoft chairman Bill Gates.