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The week in review: Fighting for business

Computer manufacturers set aside unprecedented sums for attracting start-up and online companies with the hope of developing long-term customers.

Computer manufacturers are setting aside unprecedented sums for attracting start-up and online companies with the hope of developing long-term customers.

Hewlett-Packard said it will devote $1.5 billion to dot-com businesses, while Compaq Computer has earmarked $1 billion for companies that deliver Internet access and business software applications. As with similar Sun Microsystems and IBM programs, the goal is to gain new server computer clients and in some cases share in customers' financial successes.

More and more aggressive
Leading consultancies, various high-tech companies and even media giant Time Warner also boast venture capital programs, which typically involve discounted products and services, equity investments, marketing help and sometimes even management. But while Anderson Consulting has devoted $1 billion over five years and EDS $1.5 billion over the same span, the hardware giants intend to spend that much in 12 months.

IBM, which announced a $500 million fund in January, is expected to unveil yet another initiative next week.

Big Blue and others have little choice but to move aggressively if they are to reduce Sun's huge advantage. While Compaq maintains the overall lead in server sales, Sun's systems are often considered de rigeur in the Internet industry.

Interestingly, Sun, which has announced $300 million in seed money this year, has been strongly critical of sharing revenue with business partners and reluctant to take equity interests in them. Sun also is the only major computer manufacturer that relies on outside companies for its financing operation.

Giving in
3Com said it will quit the high-end networking market to focus on emerging technologies such as wireless networking, Internet telephony, and high-speed Net access. The decision, a concession to Cisco Systems and Nortel Networks, is the latest turn in a meandering strategy to find a place in an industry populated by a few giants and several successful niche players.

Time Warner may scrap plans to spin off its entertainment Web site in the wake of a proposed merger with America Online, signaling the end of Time Warner's attempt to salvage its Internet strategy after many false starts. The future of the company's digital media division is in question as executives begin putting together the pieces of AOL Time Warner.

Separately, rival Walt Disney is approaching members of Congress in an attempt to spark further scrutiny over the proposed AOL-Time Warner merger.

Replay, which markets a set-top box containing a hard drive that allows consumers to easily record and view TV programs, received $84.9 million in additional financing from such heavyweights as Comcast, Motorola, Sega, Excite@Home, Scientific-Atlanta and News Corp. The company has filed for a public offering but shipped only about 6,000 "digital VCRs."

Car and truck prices posted on the Net are hundreds to thousands of dollars more than the manufacturers' suggested retail prices, according to a report. The surprising finding upsets the widely held idea that posting of such information acts to drive prices down.

Leading paper product companies said they will form a business-to-business marketplace, while heavyweight aerospace and defense companies are expected to follow suit. The combination of Boeing, Lockheed Martin, Raytheon and British Aerospace in a Net-based system for streamlining the buying and selling of supplies could become one of the biggest purchasing cartels yet, and may raise the specter of collusion. Meanwhile, former oil industry executives plan to launch a slightly different trading exchange.

A new program posted on the Internet transforms a popular music-trading network into a full-blown online swap meet capable of exchanging videos and software. Wrapster joins a growing list of programs allowing the quick, free and wide distribution of illegally copied files. The trend is bad news for record companies, movie studios and software companies that have fought hard to keep their wares from being pirated online.

A commission charged to advise Congress on Internet taxation failed to adopt a compromise proposal to extend the present moratorium on Net taxes while state and local governments simplify their tax codes and fold in online levies. Eleven of 19 members voted in favor, two votes short of a "supermajority" requirement, with three Clinton officials abstaining. Last-minute negotiations turned on the question of when an online company has established a local physical presence and is therefore liable for taxes.

Coming together
Wireless phone companies are beginning to move in on the mobile computing market with the addition of address books, calendars, email and other features that are the hallmark of Palm Pilots and other handhelds. Analysts expect the two kinds of devices will eat into each other's markets as consumers decide they no longer need both.

IBM is developing chips for television set-top boxes that will transform TV sets into interactive, two-way information appliances. Intel, National Semiconductor, Hitachi and Transmeta too are rushing to land deals to provide chips to set-top box makers, which in turn are competing to strike agreements with cable providers and broadcasters.

Also of note
Microsoft confirmed that code from an upcoming version of a consumer operating system was posted to the Internet, and the company is now trying to figure out who did it ? The U.S. Justice Department launched a criminal probe into charges the White House failed to hand over email sought by campaign finance investigators and used intimidation to keep the mail secret ? Microsoft's stock rose on reports that the software giant and the government may be closer to settling their landmark antitrust case ? Cisco Systems briefly topped Microsoft as the world's most valuable company, before falling back to No. 2 ? Memory maker Rambus dropped $50 Tuesday, gained more than $80 the following day, and saw an financial analyst raise his target price to $500 from $100 ? Kmart said it has signed up 1 million customers to its free Internet service in just six weeks.