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The week's news: Change pounds PC industry

Online sales and a seemingly endless price war are forcing PC makers to rapidly evolve their businesses to maintain growth and profitability.

Online sales and a seemingly endless price war are forcing PC makers to rapidly evolve their businesses, in an effort to maintain growth and profitability.

Some companies think success lies in expanding client services, while others are forming alliances to save money. The only certainty is that the industry is much changed from a few years ago, and even leading manufacturers are revamping rapidly.

Computer Darwinism
This past week, Hewlett-Packard announced it will spin off its test and measurement division into a separate company and find a new chief executive in the next 12 to 18 months. The rump company will begin to offer storage and computing capacity on a rental basis, act as a secure backbone for e-commerce transactions, and unveil other "e-services" in the near future, according to current head man Lew Platt, who said the company's admired corporate culture must become "a little more agile, a little tougher."

Dell and IBM struck a $16 billion agreement that will give Dell access to advanced technology it can't afford on its own. Perhaps more important, the pact could provide a way for IBM to make money off the PC market. Big Blue seems to have been shifting its strategy since chairman Lou Gerstner declared the "death of the PC" in an interview last fall.

The massive agreement may presage further deals between the two, according to sources, as Dell has lacked a computer services arm since Compaq bought Digital Equipment.

opened up an online superstore offering peripherals and software to all comers. The store had been in development only since December, and ironically turns the leading direct vendor into a major reseller.

Compaq said sales were off for the first part of the year, and so did Micron Electronics, which preannounced net sales and net income levels for its second fiscal quarter will fall six to nine percent sequentially. Micron blamed pricing pressure and a lull in purchasing caused by anticipation of the Pentium III.

Moving on
3Com announced that earnings for its current quarter would fall well below expectations, prompting executives to shift the company's strategy away from its classical strengths in networking cards and modems. The company's woes reinvigorates rumors that the company is ripe for a takeover, possibly by Alcatel or Siemens.

Companies that

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have invested thousands of dollars in business software from Baan say they are wary of the firm's lingering financial troubles but believe that the company will recover.

PointCast chief operating officer Philip Koen was named the company's chief executive, replacing Dave Dorman, who was named CEO of an AT&T-British Telecom joint venture. Dorman will remain chairman of PointCast's board, helping to complete negotiations to attract investors in the privately held "push" company, but said in an interview that a negotiating window with the Baby Bells had expired.

Jeremy Coote, president of German software giant SAP's American subsidiary, resigned to take a job at front-office software vendor Siebel Systems. The move comes just months after Paul Wahl, former CEO of SAP America, left the firm to join a security start-up in Silicon Valley.

Intel announced it will acquire the Level One, a maker of networking chips, for $2.2 billion in stock. The acquisition--Intel's largest ever and the first time the company has agreed to a stock-only transaction--marks a significant push into the fast-growing networking market, where the Santa Clara, California, company expects to become a leading component supplier.

A LinuxWorld
Linux and Java will form the core of a brave new computer world that is centered on the Internet and eventually bypasses Microsoft, according to the worldview of database company Oracle. The company will give Linux developers free versions of its new flagship "Internet database" Oracle 8i software, which finally began shipping this week, two months after the company's initial release date.

SAP too is rushing to support Linux, too, but business software-making rivals say the operating system is unproven and not yet ready to run mission-critical applications. Cautious vendors, including J.D. Edwards and PeopleSoft, say their customers have yet to demand Linux and they're not ready to jump into the fray.

Linux founder Linus Torvalds said developers must also focus on smaller, less glamorous systems in an address at the LinuxWorld Expo and Conference. The open source movement should further be mindful of "splintering," distributors acknowledged, but ultimately they don't fear that the operating system will become saddled with different versions.

Novell plans to beef up a prime component of its software technology to make it more palatable for high-end needs, hoping a key feature of its NetWare operating system can drive sales of associated applications and interest in developing for Novell's software.

As the once-booming market for enterprise resource planning systems slows, analysts have already identified the next big thing in business software: supply chain management. ERP software handles a company's internal human resources and financial management systems, while supply chain management (SCM) software links companies to the outside world of suppliers and manufacturers.

Microsoft's ambitious new plan for e-commerce envisions knitting together widely divergent businesses, a task no other company has managed to achieve. The master scheme, unveiled with the announcement of Microsoft's buying database company CompareNet, incorporates software, online services, company stores, and media properties into an all-encompassing package centered around its consumer-oriented MSN portal site.

Coming next
Yahoo plans aggressive, sweeping changes that will take it in several new directions, and Wall Street is applauding its designs. A new financial report provides a detailed look at multi-faceted strategies planned by the front-running portal, which intends to strike a deal for broadband distribution by the second half of this year. The company also expects to expand its repertoire of Web tool and e-commerce offerings by exploiting its buyout of GeoCities and is considering charging fees for distribution of content to handhelds and other devices.

The front-running portal may also join America Online's lobbying campaign to open the Internet cable market--another signal that the portal heavyweight is closing in on a more proactive broadband strategy. Yahoo's Jerry Yang said his company sees eye to eye with AOL's concerns over the potential "locking out" of Net service providers by the cable industry and is considering legislative avenues.

Rolling Stone entered the "destination" site race with the launch of a hub site aimed at music lovers, dubbed The site's launch comes amid a flurry of activity online among large offline media companies; has the advantage of being first to market.

Rock musician Tom Petty today entered the ongoing battle over the MP3 format, making a new single available for download at music news, information, and community site

A group of communications industry heavy-hitters joined forces to develop new technology standards so Web-based information can be accessed through a phone. AT&T, Lucent Technologies, and Motorola will promote a new organization called the VXML Forum that's dedicated to a standard method for providing voice access to the Internet, via a phone and through voice-enabled software.

Also of note
Microsoft, Red Hat, Compaq, and Hewlett-Packard were among the companies that made a bid for the domain name in 1998, the previous owner of the hot Internet real estate said ... Control of one of the satellites in Britain's Skynet system, which delivers communications services to the nation's armed forces units, was reportedly seized by hackers last weekend. Britain denied the report ... Network Solutions accidentally cut off a handful of legitimate domain names during a routine sweep to purge unpaid registrations ... Even the FTC's top economist can't find that Intel harmed innovation in the microprocessor industry, the chip giant alleged in its pre-trial brief ... Intel cut prices on Pentium II processors between 15 to 20 percent to make way for the new Pentium IIIs and match rival AMD.