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The week in review: Penguins, PCs, and network problems

Linux company Red Hat soars while PC makers get bad tidings from Wall Street. On the Net, MCI WorldCom suffers with widespread network outages.

Amid a dreary IPO market, the leading seller of Linux stormed onto Wall Street this week with a strong public debut.

Red Hat more than tripled in its first day of trading and continued to trade strongly through the week. The company sells a commercial version of Linux, which in 1998 was the fastest-selling operating system for servers, the computers that run PC networks.

The grassroots popularity of Linux (which sports a portly penguin as its mascot) has turned the heads of major companies, which have begun to integrate the open-source operating system into their products. Linux has even raised red flags at Microsoft, where executives have expressed concern that Linux could be a threat to the Windows NT operating system.

Just this week, IBM joined the effort to make sure that Linux will be ready to run Intel's next-generation microprocessor. And Big Blue's Lotus subsidiary posted a sneak preview of its Domino R5 for Linux on the Notes.Net Web site.

Gloomy prospects for PCs
Market analysts offered a gloomy outlook of the PC industry this week, painting a picture of rapidly declining prices and profits. Merrill Lynch's Steve Fortuna said the problems stem from the overwhelming popularity of low-cost PCs and manufacturers' inability to recover profits by other products.

Worldwide, the United States suffers from a saturated corporate PC market, which generates most sales in the form of replacement systems. But the market will benefit from last-minute small- and medium-business sales related to the Year 2000 technology problem, Merrill Lynch said.

Computer makers like Compaq are looking to boost sagging revenue numbers with new products and strategies. Next week, the PC firm plans to unveil a new server line during an event in New York. Perhaps more importantly, Compaq will share its new strategy for serving large customers and will introduce a significantly revamped enterprise group.

Tuesday's event is important for Compaq as it tries to salvage a miserable year. It plans to cut more than 8,000 employees from its ranks, and has lost some large customers as well as some of its own executive core. Compaq stock has sunk as a result, and is now trading at less than half its 52-week high of 51.25.

Network snafu
Business customers and Internet service providers were cut off from their data lifelines as a frame-relay network run by MCI WorldCom went down this week. The company singled out problems with Lucent Technologies' software as the cause of the failures, but as of Friday afternoon, the network was still down in some areas.

An electronic-trading system at the Chicago Board of Trade that relies on the company's network was forced to halt electronic trading.

Many customers say that MCI WorldCom has not handled the crisis well--to the point where some are considering quitting existing contracts or installing their own back-up systems to guard against future failures. This sentiment bodes ill for MCI WorldCom, which has focused its business plan on serving corporate needs.

Net land grab
In the fight to grab a larger share of the market, Internet players are cutting prices and revamping their strategies. Microsoft released a low-cost Internet access service with wholesale retailer Costco. The service is being sold as a CD-ROM at Costco for $35.97 and includes three months of Internet access--which breaks down to about $11.99 per month.

As Microsoft teams to take on Net leaders like America Online, other players in the market are making their own moves. Following the lead of European ISPs, AltaVista plans to offer free Internet access. As first reported by CNET, the ad-supported dial-up service is being offered in conjunction with start-up

Also of note
Citing dwindling use, Microsoft decided to close down its Firefly site and fold it into a separate section in MSN Communities...Lucent Technologies and Cisco Systems both made major moves into the services market, highlighting the increasing importance of network design and consulting as the networking industry transforms...Palm Computing obtained a preliminary injunction prohibiting Royal from selling its rival DaVinci handheld device, which 3Com claims was a copy of its popular PalmPilot line.