The week in review: AOL everywhere, from satellites to PalmPilots

America Online signs agreements with Hughes Electronics and 3Com, demonstrating its determination to establish alternative distribution channels, since cable TV appears to be off-limits for the online giant.

6 min read
America Online signed agreements with Hughes Electronics and 3Com, demonstrating its determination to establish alternative distribution channels as cable TV appears to be off-limits for the online giant.

In addition, leading "free PC" maker Microworkz confirmed that it is in discussions with the Dulles, Virginia, company, which boasts more than 17 million subscribers. AOL hopes that all three outlets will help the company stay abreast of interactive television and TV set-top box services to be offered by its cable rivals.

AOL everywhere
At the beginning of the week, AOL announced it will invest $1.5 billion in Hughes Electronics, the parent company of satellite TV company DirecTV and satellite-based ISP DirecPC. The cash investment will be used to co-market satellite television and high-speed versions of America Online.

The next day, AOL inked a deal allowing members to send and receive email from their AOL accounts on their PalmPilot handhelds. 3Com will also bundle AOL's new software, and the two firms will jointly market-test a special Palm III and PalmModem package. Financial terms were not disclosed.

AOL's interest in PC manufacturers may have more lasting consequences for the high-tech industry. PC makers are eager to diversify because hardware carries increasingly lower margins, and they have something to offer ISPs in the form of highly desirable screen space. Signing up consumers also means beefing up their customer base.

In Europe, AOL is exploring a new division that will offer a subscription-free Internet access service but will not carry the content from AOL's proprietary service. AOL and joint venture partner Bertelsmann could roll out the service in the next three to four weeks, an AOL spokesman told Reuters.

Separately, rumors circulated that EarthLink Network would be purchased by PC maker Gateway, which already runs its own ISP.

Busy on Capitol Hill
Congress spent much of the week rehashing high-tech legislation that's come up in previous sessions. In the most notable moves, the Senate and House Commerce committees approved bills to ease controls put in place under the Clinton administration's strict licensing regime for the export of strong data-scrambling products.

Separately, the Senate's Commerce committee approved a bill requiring schools and libraries with government-subsidized Internet hook-ups to use content-filtering software to protect children from sexually explicit material on the Internet. It also voted in favor of legislation giving electronic signatures the same legal validity as those penned in ink.

The House Commerce Committeej, led by Thomas Bliley (R-Virginia), issued a strongly worded attack on efforts to privatize the Internet's addressing system, saying the nonprofit Internet Corporation for Assigned Names and Numbers (ICANN) corporation has exceeded its authority by deciding to impose a $1 fee on Web addresses. On a related front, a federal judge erred in ruling that Network Solutions is immune from antitrust lawsuits, a small Internet registrar argued in an appeal seeking to overturn a decision issued three months ago, according to an appeals court.

Despite the Commerce Department's hope for smooth transfer of power over the Net's infrastructure from the U.S. government and its contractors to the free-market private sector, Network Solutions and ICANN are headed toward a stalemate. Both entities have signed cooperative agreements with the government, but not with each other. In Williamsburg, Virginia, members of the Advisory Commission on Electronic Commerce squared off and exposed the wide gulf between government and business interests in the shaping of federal Net tax policy. State and local government officials back the interests of bricks-and-mortar retailers, while e-commerce firms advocate nurturing the Net through minimal taxation.

A committee from the San Francisco Board of Supervisors declined to adopt a resolution recommending that the city transfer cable franchise licenses from Tele-Communications Incorporated to AT&T following the firms' merger, moving the municipality into the national spotlight. At the same time, a group of local officials met with the FCC this week, taking up an Oregon ruling that effectively gave local municipalities the right to force cable firms to open their networks to competing Internet service providers.

Courting continues
Compaq Computer and CMGI confirmed that they are in talks for CMGI to acquire a "controlling interest" in Compaq's AltaVista Web portal. The deal may include AltaVista's Shopping.com and local guide network Zip2. The PC maker's board concluded a regularly scheduled meeting without deciding either on the proposed sale or on a new chief executive for the Houston company.

Qwest Communications raised its offers for US West and Frontier, underlining its determination to trump rival Global Crossing's bid for the two companies. The new offer raises Qwest's original bid by more than 5 percent and contains a "collar," or floor, which would preserve a minimum bid value even if Qwest's share price drops further.

Leading graphics chip company S3 will purchase Diamond Multimedia Systems, maker of the Rio MP3 music player and other products. The deal is worth roughly $173 million based on S3's trading price. S3 executives indicated more deals are in the offing.

Juniper Networks jumped nearly 200 percent in its first day of trading, a closely watched initial public offering. The network equipment maker touts a line of devices that are faster than products from Cisco Systems, the reigning king of data networking.

Restructures in the works
Dell is undergoing a quiet yet far-reaching reorganization in an effort to prepare for coming industry changes. New initiatives include a restructuring of the desktop computer group, the introduction of new "e-services," more focus on partnerships with telecommunications firms and ISPs, and new desktop designs. The effort is being propelled by diminishing profits in the traditional areas of personal computing--which is affecting all PC makers.

AMD will likely report an operating loss of close to $200 million for the second quarter, according to chairman Jerry Sanders, a far larger figure than previous net quarterly losses. Revenues will fall below $600 million, the product of price competition with Intel and a surplus. AMD also made official reports that the company will market the new K7 as the Athlon processor.

3Com rebounded from a poor third quarter to beat expectations by a penny, reporting earnings of 24 cents per share, but company statements alerting investors that future revenue will decline sent the company's stock tumbling.

CompUSA, the nation's biggest computer retailer, announced sweeping changes, including job cuts, the possible closure of up to 14 locations, and a shift away from its focus on desktop PCs. The company expects to take charges of $40 million to $50 million in its fiscal fourth quarter and the first two quarters of 2000.

Firms tap niches
Several companies are hoping to tap into an emerging niche for storing computer files on the Web, where they can be available from any networked computer. The migration of email and calendar applications from the desktop to the Web has been one of the past year's defining trends.

Lycos is quietly developing a broadband strategy to tap into the growing population of high-speed Net users, following similar efforts by competing Web portals. Called Lycos Lightning, the project is the first concrete indication that the company is serious about introducing broadband applications across its network of services and features.

Palm Computing will release two updates to the Palm Operating System, pioneer larger handheld systems, and aggressively step up its licensing plans during the next six months, according to the company's president.

Dell Computer will deliver a new line of workstations this fall using high-speed Rambus memory, a major endorsement for the beleaguered memory company.

Cabletron Systems outlined plans to test a high-end routing device that can handle a variety of communications technologies, underscoring the corporate-oriented company's reliance on technology from a start-up it bought early last year for about $215 million. The device, tailored to the needs of ISPs and emerging communications companies, would be the one of the most ambitious development efforts in the company's history.

A handful of DSL service providers and equipment makers plan to use the comparatively new technology to offer as many as 16 voice lines over a single copper wire. So-called voice-over-DSL (VoDSL) offerings, now in the testing stages, promise to give small and medium-sized businesses more phone numbers and Internet access at a much lower cost.