The week in review: Tighten that belt

Microsoft CEO Steve Ballmer sent a memo to employees calling for the software company to change its business priorities after a surprise profit warning.

In a tone more befitting a failing dot-com than the world's leading software maker, Ballmer said, "We all have a big incentive as shareholders to re-ignite the kind of cost-conscious culture that marked Microsoft's earlier years."

Separately, Sun Microsystems chief executive Scott McNealy told employees in an internal memo that the slowing economy will lead to continued cost cutting and more circumspect hiring.

Indicating that the U.S. economy is slowing at a moderate pace, the Federal Reserve left interest rates unchanged. The Fed has raised rates six times since June 1999 but has decided to leave rates alone during its past five meetings.

Finding a harmony
Online music company EMusic, along with several independent record labels, became the latest to file copyright lawsuits alleging that MP3.com infringed its copyrights.

EMusic and its label partners allege that MP3.com's controversial My.MP3.com music locker infringes on their copyrighted works. The lawsuit comes after MP3.com settled or was ordered to resolve separate lawsuits with the Big Five record labels: Universal Music Group, EMI Recorded Music, Sony Music Group, BMG Entertainment and Warner Music Group.

Amid the growing popularity of digital music, there is a move afoot to develop formats that would allow audio files to be played on consumer CD and DVD players as well as on personal computers. Organizations such as the Optical Storage Technology Association are pushing a new CD compatibility specification called MultiPlay.

Rock band Transmatic has shown that it's possible to be discovered on the Web. The group signed with Virgin's Immortal Records after a talent scout heard its music on Loudenergy.com, which offers emerging artists the opportunity to load up to three MP3 tracks on its site. It then sifts through the music in an attempt to identify and develop new talent.

You've got supervision
Microsoft chairman Bill Gates telephoned the chairman of the Federal Communications Commission to urge a close examination of America Online's dominance in instant messaging. The call came as the FCC closes in on a recommendation concerning AOL's proposed merger with Time Warner, which could include requiring AOL to make concessions on instant messaging.

The federal review of the merger may face its biggest test in the coming year, when a government-appointed chaperone begins to referee the deal. Assuming AOL and Time Warner receive the blessing of the FCC, which is expected, questions persist about how freely the combined companies will be allowed to operate.

President Clinton reappointed to the FCC a Democrat who will be allowed to vote on the AOL-Time Warner merger. For the last year, Senate Commerce Committee Chairman John McCain has blocked the FCC's Susan Ness from being reappointed to that body. However, the president can appoint people to government positions without congressional approval when Capitol Hill is adjourned. Now Ness will be able to vote on the AOL-Time Warner merger.

Home for the holidays?
Rex, the tiny electronic organizer that had been poised for a comeback, is back in the doghouse. Xircom, the maker of the credit card-sized personal digital assistant, began filling preorders of the Rex on Dec. 4 but then halted shipments Dec. 15 because of problems with the device. Xircom was caught by surprise when some of the first buyers reported slow synching with computers using a PC card slot.

Dell has been struggling to get its top consumer systems--the Dimension 8100 desktop PC and Inspiron 8000 notebook--to customers, with some people reporting six-week delays on orders placed in November. For some Dell shoppers, this means the shiny new PC or notebook they had been counting on for Christmas won't arrive until after the new year.

Notebook sales may be even worse than those of PCs. "If anything, notebooks are going to slow down even more than desktops because they're a higher-ticket item," one analyst said. With Christmas just days away and the fourth-quarter close quickly approaching, notebook makers and dealers are scrambling to unload stock.

A market maverick has sneaked an extra 2,500 Sony PlayStation 2 game consoles into Britain from a "secret location" in Northern Europe, according to reports. A European supermarket chain is selling the consoles for $442 each, after securing the consoles after a covert five-month operation.

Also of note
Amazon.com began testing Amazon.com Outlet, a new online store where the company hopes to move overstock and discontinued items much the way brick-and-mortar outlet operations do...AT&T lowered its fourth-quarter earnings and revenue targets again, citing lower-than-expected revenue growth from its consumer and business long-distance services..."Kriz," a year-old computer virus, may be coming back for Christmas this year, thanks to its ability to piggyback on other viruses and spread with them.