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Week in review: Betting on survival

Summer shopping gets off to an early start as Sun Microsystems takes out its checkbook and makes a big bet on its future.

Summer shopping got off to an early start this week as Sun Microsystems took out its checkbook and made a big bet on its future.

In a move to add to its market heft, Sun is acquiring storage specialist StorageTek in a deal worth $4.1 billion. The deal will give Sun a greatly expanded storage product line, additional sales channels and a larger sales force and partner network, company executives said.

Sun CEO Scott McNealy said the combination of two companies' gear will make Sun one of the largest providers of "information lifecycle management" products, which combine hardware and software for creating, storing and archiving corporate data.

Sun and StorageTek's storage product lines will be merged and sold by a combined sales force, executives said. StorageTek, which employs about 7,100 people, will mix into Sun's storage organization under Mark Canepa, executive vice president of Sun's storage products.

Sun hopes the $4.1 billion bet will help restore Sun's financial fortunes, but it's a huge bet: It's the last cash deal of that size Sun will be able to make. Sun plans to spend $4.1 billion of its $7.4 billion in cash and marketable securities on StorageTek in a deal expected to close by late summer or early fall. Even with the $1 billion in cash StorageTek will bring, Sun will have a hard time affording any comparable moves.

Sun is trying to rebuild its primary business, selling powerful networked computers called servers, and is trying to elevate its software products with an open-source revamp. The StorageTek acquisition, however, shows that Sun believes storage is the business where it can get the most bang for its buck.

In another resuscitation effort, eBay plans to acquire in a $620 million cash transaction. The acquisition brings the Web's biggest comparison shopping engine under the hood of the largest auction site at a time when eBay has been struggling to maintain its growth in the face of increasing competition from Yahoo, Google and others.

The acquisition puts eBay in close competition with the commercial engines of search giants Yahoo and Google. The deal also is a sure sign of eBay's financial interest in the booming search-engine marketing business, which is expected to be worth more than $5 billion this year.

In the chips
The chip industry is seeing big changes, but not all of them bode well for the sector.

Intel's "Yonah," a notebook chip due in the first part of next year, is going to be quite different from its predecessors. The chip, which will be made on the 65-nanometer process, will come with a number of enhancements over the current Pentium M line of notebook chips, according to Mooly Eden, vice president of the mobility group.

The chip will contain two cores, instead of the single core on current notebook chips. The two separate cores will also share a 2MB cache. Current dual-core desktop chips from Advanced Micro Devices and Intel come with similar-sized caches, but each core accesses only 1MB of cache memory dedicated to it. Sharing the cache will significantly boost performance.

Meanwhile, struggling chip designer Transmeta has found a buyer for its microprocessor business. Technology, a subsidiary of Culturecom Holdings of Hong Kong, will purchase the rights to the Crusoe microprocessor, the first chip produced by Transmeta, and acquire a license to produce its successor, the Efficeon chip, via a 130-nanometer manufacturing process.

Transmeta will continue to produce 90-nanometer Efficeon chips for a few select customers, but will discontinue producing the 130-nanometer versions by the end of the year and leave those chips to will try to sell Crusoe and Efficeon processors to electronics manufacturers serving the Chinese market.

Overall, a drop in memory prices and lower demand from cell phone makers pushed global chip sales down in April, the Semiconductor Industry Association reported. Sales for the month fell to $18.2 billion, a drop of 1.2 percent from March, the industry group said. Though April is traditionally considered a strong month for semiconductor sales, the SIA said it doesn't think the dip will affect total performance for 2005.

Microsoft moves
Microsoft was busy making tweaks to its software this week, one of which is drawing intense criticism from some Windows users.

The company plans to introduce new XML-based file formats for its Excel, PowerPoint and Word applications when the company launches its Office 12 software package next year. Company executives said the move to replace Microsoft's traditional binary file formats with XML-based versions as the default in Office 12 will let people more easily share information.

While Microsoft's Excel and Word programs already offer some XML compatibility, the new format is expected to bring those applications, and PowerPoint, into a "full fidelity" version of the standard. The biggest-touted advantage of the new formats will be their capacity to let workers access data from various documents without opening individual files, and to allow workers to use that information in new ways.

However, the software giant drew some criticism after confirming that it will not make Internet Explorer 7 available to users of its Windows 2000 operating system. Although Windows 2000 will be supported until 2010, at the end of June of this year Microsoft will no longer accept requests for design changes or new features for the operating system.

In response to criticism from an antitrust compliance committee, Microsoft has agreed to make modest changes to Windows XP. In a court filing this week, the U.S. Justice Department and some states charged that Web-related resources, such as saved HTML files, continued to be denoted by an Internet Explorer icon, even when it was not the default browser. Also, the filing said, disabling Internet Explorer in XP does not automatically delete user-created shortcuts pointing at the application.

Microsoft said in the same filing that it will modify XP to respond to those concerns. The Internet Explorer details were unearthed by an oversight committee that was created as a result of an antitrust settlement agreed to by Microsoft and the federal government in 2001.

The company also filed its latest attempt to comply with the 2004 antitrust ruling from the European Union.

A tough call
The FBI and Department of Homeland Security are objecting to a proposal to permit the use of cellular telephones and other wireless devices on airplanes. Unless telecommunications providers follow a lengthy list of eavesdropping requirements for calls made aloft, the FBI and Homeland Security don't want cellular or wireless connections to be permitted.

At the moment, technical and social considerations keep cell phones muted during flight: Few passengers relish the prospect of sharing a row of seats with a yappy fellow traveler. Also, concerns about overwhelmed cellular towers and interference with avionics systems have resulted in the current prohibitions.

As it appears likely that cell phones will become a fixture in airplanes, CNET has prepared a FAQ to clear up confusion on when the rules will be relaxed, the technology that will make it happen and why there's a ban in the first place.

Cell phone users also seem to be a little confused about cell phone viruses. Network security experts F-Secure say there's a relatively simple reason why even the savviest cell phone owners are falling prey to a new virus.

Phone owners are duped because the virus, known as Commwarrior, is attached to premium cell phone e-mail known as MMS, which makes incoming e-mail look as if it was sent by someone the victim knows. F-Secure's findings come on the heels of a survey of 300 American adults by security company Symantec in which 73 percent said they know cell phones are virus targets.

Also of note
Taking another crack at the living room, Intel is again showing off a concept PC that closely resembles Apple Computer's Mac Mini...Apple has agreed to settle several class action suits over the battery life of its popular iPod portable music players, offering extended service warranties and $50 store credits to consumers who lobbed complaints...The nonprofit organization responsible for Internet addresses approved ".xxx" domains, a move that reverses the group's earlier position and heads off a potential political spat with conservative U.S. politicians...A century after Albert Einstein submitted five revolutionary physics papers, his ideas still have resonance for scientists and high-tech researchers.